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» MONEY // SPECIAL REPORT
When It’s Time
to Call In a Pro
Our guide will help you find the right adviser to get
your financial life in order.
By LISA GERSTNER and
—or at lea
a C+ on thei
ity to sav
, and a B fo
uch as pay
to a su
no one to r ely on for
ide to see
ome in a con
Plus, hiring a pro seems out of reach
to many because they think they don’t
have enough money to manage or
won’t be able to afford the fees.
Our guide will walk you through
the steps to find the right financial
adviser for you, no matter how much
you earn or how much you have in savings
and investments. You can develop
a long-term relationship with an adviser
or get an affordable, one-time
checkup to see if you’re on track with
your financial goals.
Do I need a
AT CERTAIN CRITICAL JUNCTURES,
hiring someone who will make sure
you’re heading in the right direction
is well worth the cost.
Deploying a retirement strategy is
one of the top reasons to see a financial
adviser. Ideally, you’ll get help
while you still have plenty of time to
save and invest your money. James
Kinney, a certified financial planner
(CFP) and owner of Financial Pathways,
in Bridgewater, N.J., says that
many clients first visit when they’re
within a few years (or months) of their
anticipated retirement date. “The
question most often on their minds is,
‘Can I afford to retire?’ At that point in
their lives, what if the answer is no?”
says Kinney. Although many of the
clients of Rick Rodgers, a CFP in Lancaster,
Pa., come to him a year or two
before retirement, he would prefer
to start working with them 10 years
before their planned retirement date.
Retirees and people close to retirement
can get help designing a withdrawal
strategy that minimizes taxable
income, says Ann Gugle, a CFP,
certified public accountant (CPA) and
principal at Alpha Financial Advisors,
in Charlotte, N.C. Gugle often works
with clients in their sixties who have
a few years left before they must start
taking required minimum distributions
from their tax-deferred retire-
ment accounts at age 70½. That’s valuable
time they can use to separate
money into different buckets—perhaps
by cutting back on tax-deferred savings
or converting some holdings in
a traditional IRA to a Roth IRA.
Getting married or divorced, starting
a family, dealing with the death or
disability of a family member, or starting
a new job are all good times to seek
out an adviser. Any change in your
family situation may necessitate an
update in your estate plan and documents.
When you have kids, an adviser
can help you juggle college and retirement
savings or manage your budget
if one parent decides to stop working.
When taxes loom large, you can get
help from tax advisers and preparers.
You may want someone to prepare
your returns and help spot tax breaks.
Self-employed people may need a hand
with calculating quarterly estimated
tax payments and claiming deductible
business expenses. If you own a rental
property, an expert can help you sort
through the convoluted tax rules.
An inheritance or some other windfall
may present you with extra cash
that you’re not sure how to handle.
You may also have more funds as a
result of, say, steady progress in paying
off debt or a hike in income. An adviser
can help you figure out what to
do with the money.
Depending on how complicated
your estate is, you may want to enlist
experts in tax planning and other areas.
You may need advice, for example, if
your assets will be subject to estate
tax. (For 2016, assets transferred to
heirs are exempt from federal tax if
they’re worth $5.45 million or less
for individuals or $10.9 million or less
KIPLINGER’S PERSONAL FINANCE 08/2016
for married couples. But a number
of states tax estates at much lower
levels.) “It’s also important to seek
estate-planning guidance in the case
of a second marriage or any nontraditional
family situation,” says Jordon
Rosen, an accredited estate planner
and CPA in Wilmington, Del.
What kind of adviser
should I look for?
YOU MAY NEED HELP WITH JUST
a slice of your finances. But the more
complex your situation, the more
likely you’ll need a group of experts to
cover all the bases—perhaps a financial
planner to take a holistic look and
to act as “quarterback” of the team, an
accountant to prepare your tax return
and delve into the finer details of tax
planning, and a lawyer to handle your
estate documents. In some cases, a single
person or firm may be able to take
on multiple duties. Some CFPs, for instance,
are also CPAs, with in-depth
Use the guidelines below to search
for a professional who can help you
reach your goals. Some credentials
carry more weight than others. Be
wary of “senior specialists,” for example,
whose bona fides may be flimsy,
says Eleanor Blayney, consumer advocate
for the CFP Board. See a list of designations
the issuing organization and educational
requirements for each. To minimize
conflicts of interest, look for a
fee-only planner, who receives compensation
only from clients and accepts
no commission for selling investments
or other products (search for a
fee-only planner at www.napfa.org).
General financial planning. A CERTIFIED
FINANCIAL PLANNER can make a broad
assessment of your finances. A CFP
must complete coursework in personal
financial planning, pass an exam, have
two to three years of planning experi-
ence, and commit to a code of ethics
and standards. He or she will review
your cash flow (including budgeting,
savings and debt), insurance coverage,
estate and tax planning, and investment
allocation. A CHARTERED FINANCIAL
CONSULTANT (CHFC), who also meets
advanced education and experience
requirements, can provide general
financial planning services, too. A
CHARTERED FINANCIAL ANALYST (CFA) is an
investing specialist who has successfully
completed a three-part exam,
including testing on portfolio management
and wealth planning.
After the analysis, you should receive
an action plan with steps toward
improvement, and you may also get
projection reports that show how
much you need to save to reach goals
such as retirement and funding college.
Fee-only planners may charge a flat
annual retainer (which could run a few
thousand dollars or more); on an hourly
basis (often from $100 to $250 per
hour); by the project (from $1,000 up
to $10,000 for a comprehensive plan);
as a percentage of assets, if they’re managing
your investments (from about
0.5% to 1.25% of your investable assets);
or some combination of those models.
Tax advice. If you’re looking for a professional
to prepare your tax return,
Getting Advice Online
IF YOU’RE UP FOR THE TASK OF ORGANIZING YOUR FINANCES ON YOUR OWN,
you’ll find no shortage of free or low-cost online tools to help you do the job. With a
budgeting app such as MINT.COM, for example, you can track bank, credit card and loan
balances, monitor your investment portfolio, set savings goals, and see your credit
score. HELLOWALLET ($100 a year or free as an employee benefit from participating
companies) also provides budgeting and investment-tracking tools, plus a financialwellness
score that digs into such areas as insurance coverage and emergency savings.
You can use a calculator that determines how much you should have in your emergency
cash stash free at www.hellowallet.com/emergency-savings. At KIPLINGER.COM, the
Retirement Savings Calculator estimates the future value of your retirement savings
and projects how much you need to save monthly to meet your goal.
Web tools can go a long way toward shaping up your finances, but they can’t do it
all. Along with taking a more comprehensive and personalized look at your situation,
a human adviser can hold your hand in a crisis. If you’re prone to panic when the market
goes into free fall, for example, you may be better off working with someone who can
be “a barrier between you and an overreaction,” says Arielle O’Shea, investing expert
with personal finance site NerdWallet.com. And if you’re dealing with a considerable
amount of wealth or don’t want to do the research and other legwork required to
manage your own money, you’re better off hiring a person.
Some outfits supplement their online components with counsel from live advisers.
At LEARNVEST.COM, for example, you can use a free budgeting tool without any further
commitment. If you want to work with a fee-only certified financial planner (or an
investment adviser), you can have a relationship with one over the phone or via e-mail
for a one-time fee of about $300, plus $19 monthly.
PERSONAL CAPITAL offers a free online tool that tracks cash flow, budgeting and
investments, plus an investment checkup with recommendations and an analysis of
fees. If you’d like to consult a human investment adviser, you’ll be charged from 0.49%
to 0.89% of your investment account balance, depending on its size.
08/2016 KIPLINGER’S PERSONAL FINANCE 31
make sure he or she is credentialed—
anyone can hang out a tax-preparer
shingle. ENROLLED AGENTS have passed
an IRS-issued test on preparing tax
returns (or they have worked for the
IRS). They must also meet continuingeducation
requirements, and they have
full rights to represent you before the
IRS. You can find an enrolled agent at
www.naea.org. The average price to
have a professional complete an itemized
Form 1040 with a Schedule A
and a state tax return was $273 for
the 2014 tax year, according to the
National Society of Accountants.
If you want help with your overall
finances but with an emphasis on tax
Rights and Protections
planning, a CERTIFIED PUBLIC ACCOUNTANT
who is also a PERSONAL FINANCIAL SPECIALIST
(PFS) or CFP may be the best choice.
A certified public accountant has a
high level of expertise in tax law, must
pass a rigorous series of exams and is
licensed by the state. A CPA who has
a PFS designation has also passed a
separate test about broader financial
planning. At www.aicpa.org, you can
find contact information for each
state’s CPA society and search for CPAs
near you. And at www.acplanners.org,
you can search for tax-focused, feeonly
planners who charge clients on
a retainer basis.
If you have a broad relationship with
If the Relationship Sours
IF YOU HAVE ANY PROBLEMS WITH AN ADVISER OR SUSPICIONS ABOUT HIS OR
her recommendations, you can contact the Securities and Exchange Commission’s
office of investor assistance at 800-732-0330 to ask questions or file a complaint.
You can also file a formal complaint online at www.sec.gov/complaint.shtml. The SEC
sends the complaint with a letter to the adviser, who is required to respond to the investor
and the SEC in writing. A trade may be reversed, or there may be a settlement
offer, or the complaint could go to arbitration or mediation. If the SEC sees multiple
complaints about one adviser or firm, it may pass the information along to investigators,
who in turn could take enforcement action.
You can file a complaint against a CFP through the CFP Board. (Go to www.cfp.net,
click on the “About CFP Board” tab, and go to the ethics and enforcement section to
file a complaint.) For problems with insurance agents, contact the state insurance
department (find links at www.naic.org).
If you have a problem with your broker, Finra recommends first talking with your
broker or the broker’s manager, then contacting the compliance officer at the brokerage
firm, says Gerri Walsh, senior vice president of investor education for Finra. If that
doesn’t work, then file a complaint with Finra at www.finra.org/investors.
Your rights and protections will get even stronger in the next two years. The Department
of Labor’s new fiduciary rule is designed to ensure that anyone getting paid to
provide investment advice for your retirement account must put your best interests
ahead of his or her own; the rule will especially affect advisers who charge commissions
rather than transparent fees. Its main provisions, including imposing a fiduciary
status on advice providers, take effect on April 10, 2017. The extra requirements for
financial professionals who accept commissions don't fully kick in until January 1, 2018.
Regulators and financial-services firms are still figuring out the details, but insurers
and brokerage firms are already changing the structure of some of their products to
move away from up-front commissions.
your tax adviser, he or she may charge
an hourly or retainer fee, by the project,
or as a percentage of assets if he
or she manages investments for you.
Estate planning. You’ll need a LAWYER to
draft a will that states how you want
to divvy up your assets and appoints
a guardian for your children or other
dependents. Other documents to draw
up include a living will, which outlines
your wishes for end-of-life medical
care; financial and health care powers
of attorney, which designate who will
handle decisions if you become incapacitated;
and possibly a revocable
living trust (see “Game Plan,” on page
42) to streamline the transfer of assets
to heirs after you die, says Michael
Novak, president of the Estate Planning
Council of Cleveland.
Your financial planner, accountant
or other adviser may be an ACCREDITED
ESTATE PLANNER (AEP), who has taken
specialized coursework or has at least
15 years of experience in estate planning
(search for an AEP at www
.naepc.org). An estate planner’s fee
depends on how he or she charges in
general practice. To have a lawyer
draw up documents, you may pay anywhere
from several hundred dollars to
several thousand dollars, depending
on their complexity, says Rosen.
What if I need help
with my investments?
MANY CFPs WILL ALSO MANAGE
investments. Or you could choose a
broker who works for a brokerage
firm or hire an independent REGISTERED
INVESTMENT ADVISER (RIA), who may also
be a CFP. A lower-cost option is a
robo adviser (see “Best of the Online
Brokers,” on page 44).
An adviser who manages your
investment portfolio may require a
minimum amount of investable assets.
The floor could range from $50,000
or $100,000 up to $1 million or more.
Ask advisers you’re considering how
KIPLINGER’S PERSONAL FINANCE 08/2016
much their clients typically have in
assets to see how experienced the firm
is with people who have finances similar
to yours. At www.letsmakeaplan
.org and www.plannersearch.org, you
can search for CFPs based on asset
minimums and fee structure.
Most money managers are paid by
a percentage of assets under management—typically
about 1%. Find out
which assets are included in the fee
calculation. Some advisers include
only the assets they manage; others
add your 401(k) balance, even though
they don’t administer it; and a few
assess the fee on all assets.
RIAs must put your best interests
first, according to the fiduciary standard
(see the box on page 32), and provide
you with a Form ADV, which outlines
the services they offer and their fees.
Working with a commission-based
broker may be less expensive if you
buy and hold your investments. But
ask questions to make sure brokers
are putting your interests first. “Ask if
they use proprietary products and, if
so, why? Do they think they’re better
than everything else? Do they get paid
commissions when they use them?”
says Brooks Herman, head of data and
research for BrightScope, which provides
information about advisers. Also
ask about fund fees and share classes
(you can compare fees at www.finra
How do I find
a good adviser?
GET RECOMMENDATIONS FROM
other financial professionals, such as
your accountant, insurance agent or
lawyer, or ask your friends and colleagues.
Talk with people who have
similar goals and situations to yours.
You can look up advisers who hold
the CFP credential at www.letsmake
aplan.org or find fee-only advisers at
www.napfa.org. Both databases let
you search by zip code. Don’t have
a sizable (or even measurable) net
worth? You can search for a CFP who
requires no asset or income minimums
through the XY Planning Network
members focus on Generation X and
Generation Y clients, or the Garrett
Planning Network (www.garrett
planningnetwork.com)—a great option
if you want a one-time check-up, because
its planners charge by the hour
and require no long-term commitment.
Come up with half a dozen advisers
who look like a good match. With
today’s technology, you can work with
an adviser from a distance, but many
prefer to at least start the relationship
in person. Before you contact them,
check them out.
34 KIPLINGER’S PERSONAL FINANCE 08/2016