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Tell your planner the whole truth

A consultant needs the facts, straight answers

SHARE Tell your planner the whole truth

Americans sometimes fib about how long it takes them to get to work, their weight, their age, their drinking habits, how much TV they watch and whether they ate dessert last night.

So it's hardly a stretch to accept that they'd fib to a financial adviser about their income, savings or investments.

Maybe they don't want anyone else to know their business. Maybe they want to seem like high rollers. Maybe they can't be honest with themselves or anyone else about how much money they're capable of saving or investing. But it happens.

"Past family experiences may have made people distrustful of help or left them with issues of control, and that's why they can't disclose everything," says Marilyn Capelli, certified financial planner and president of Capelli Financial Services in Bloomfield Hills, Mich. "Unfortunately, such personal issues are unlikely to change."

Whatever their reasons, when Americans invest inappropriately it's sometimes their own fault.

"It's so important to know where an individual has money," said Vern Hayden, a CFP and president of Hayden Financial Group LLC in Westport, Conn. "Otherwise, you wind up with an inaccurate picture when planning for retirement and other important needs."

Many investments simply require walking up to a counter or tossing a check into the mail. No one but you monitors them. While not everyone needs a financial planner, everyone needs a plan. You need the proper amount of money set aside for a rainy day, a budget and a savings plan that work, and a strategy to invest for personal and family goals.

If you require a professional to help form your financial plan, level with that person about all your holdings. By the same token, demand that the planner level with you about experience and credentials. Honesty is the best policy on both sides of this fence.

Capelli, a planner for more than two decades, and Hayden, who has been in the business more than three decades, have been around long enough to be able to reject any prospective client who is less than candid.

"A person might be super-private, and everything may not come out at our first meeting, but it must come out before there's an agreement for us to do the job," asserted Hayden, who acknowledges that some clients weren't quite as open with him when he was first starting out in the business. "There are forms to fill out and a series of questions, a really thorough process."

Lack of disclosure isn't always fibbing. "We find that clients have forgotten investments in initial discussions with us," said Capelli. "They only remember them in later planning sessions."

Assemble an accurate list of all holdings and their value before you visit a financial planner. That first visit to the planner, who may have been recommended by a friend, relative or co-worker, is important. Request references, and ask how long the planner has been in the business. Inquire whether he or she is licensed or registered as an investment adviser with the state or federal government.

Ask about professional designations:

The certified financial planner (www.cfp.net) requires a two-day, 10-hour examination, three years of planning experience and continuing education.

The chartered financial consultant, or ChFC (www.chfc-clu.com), primarily for those in the insurance industry, requires 10 two-hour tests and three years of experience.

The personal financial specialist, also called a CPA/PFS (www.cpapfs.org), is an additional designation for certified public accountants.

"Full disclosure of the method of compensation is important so the client can make a choice," said James Barnash, president-elect of the Financial Planning Association (www.fpanet.org) and managing director in Chicago for Lincoln Financial Advisers Corp. "Another big area to check is the planner's areas of expertise, such as saving money for college, along with the philosophy on investing or working with clients."

Ask about the fee structure and agreement:

Will you be charged an hourly rate, a flat fee, or a percentage of assets under management?

If the planner also sells financial products, what is the percentage of the investment or premium the planner receives on various investments?

Will the planner receive financial benefits from the professionals or agents to whom you might be referred?

Does the planner provide a written client engagement agreement? If the answer is no, ask why not.

"You want someone who takes time to listen, since a planner with one answer to all questions isn't working," said Jamie Milne, chairman of the Chicago-based National Association of Personal Financial Advisors (www.napfa.org) and owner of Milne Financial Planning in Barre, Vt.

At the get-acquainted visit, you should determine whether this is someone you can work with and who will follow your wishes. Are you compatible? Remember that this isn't the only planner in the world, and you can take your business elsewhere if the two of you don't click.

"You really want to understand how the adviser could create value for you," added David Diesslin, chairman of the Certified Financial Planner Board of Standards (www.cfp.net) and a financial adviser with Diesslin & Associates Inc. in Ft. Worth, Texas. "It's also important to be able to communicate and be comfortable with each other."

The more open and truthful you and the planner are with each other, the better your relationship will be.

Andrew Leckey answers questions only through the column. Address questions to Andrew Leckey, "Successful Investing," P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at andrewinv@aol.com.