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Balancing act: Do homework before picking financial adviser

Every week, one of my bosses, Wendy Ogata, edits my column. Usually she offers a few suggestions and that's the end of it.

But a couple weeks ago, after perusing a column in which I suggested that a reader seek a financial adviser, she asked a question of her own: "How much do the services of a financial adviser cost? I've been thinking I need to find one, but I don't know what to expect to shell out."

That's a great question. So I contacted a few of the advisers who usually help answer questions for this column, asking if they would share their fee structures with me.

Several did, but they also sent advice on how a person should go about selecting an adviser. So I've decided to focus on those tips this week and turn my attention to fees next week.

Paul Winter, principal of Five Seasons Financial Planning in Holladay, said the way in which financial advisers are paid is a big concern for potential customers, but it should not be the only concern.

As with legal or medical advice, he says, consumers should consider the education, certification, experience, potential conflicts of interest and "bedside manner" of a prospective adviser.

Roger Smedley and Sharla Jessop of Salt Lake-based Smedley Financial Services say consumers should look for the "4 E's":

Experience, including years in business as an adviser and a clean regulatory record.

Education, including professional designations.

Examinations, including licensing and certifications.

Ethics, meaning someone who is competent, has a high level of integrity and is service-oriented.

Roger and Sharla suggest looking for someone who offers a free initial consultation and will take the time to understand a person's entire situation before presenting options.

"Choose an adviser who agrees to meet with you on a regular basis to review your personal situation, tax law changes, current investment environment, as well as discuss the performance of your portfolio," they wrote in response to my question. "This will help you avoid frustration and protect you from the common answer of 'just stay the course.' "

Ray LeVitre, certified financial planner and managing director of Salt Lake-based Net Worth Advisory Group, includes an entire chapter in his book, "The Retiring Boomer's Financial Handbook," on searching for an adviser. He suggests that hiring a good adviser is similar to hiring a good employee and recommends a seven-step process.

First, he says, find an adviser with at least 10 years of experience. The turnover of advisers in their first five years in the business is high, Ray says, and you should "let the young advisers cut their teeth on others' money, not yours."

He also suggests finding an adviser who has the Certified Financial Planner designation, which means the person had two years of training followed by a "rigorous two-day examination."

Ray further recommends using a fee-only adviser, as opposed to one who works on commission. Ray is such a fee-only adviser, but we'll talk more about that next week.

The rest of the seven steps are: insist on a plan and a well-defined investment strategy; insist your adviser has an action plan for servicing your account; make sure the adviser offers a wide range of investment options; and investigate the adviser's practice.

Ray says you should use one of several Web sites to find experienced advisers in your area, then call and interview (extensively!) those you feel are most qualified. The sites he suggests are:

National Association of Personal Financial Advisors, www.napfa.com.

Garrett Planning Network, www.garrettplanningnetwork.com.

My financial advice, www.myfinancialadvice.com.

Financial Planning Association, www.fpanet.org.

Financial Advisor Match, www.financialadvisormatch.com.

Other sites to consider when making a choice, especially to check an adviser's record, are:

The U.S. Securities and Exchange Commission, www.sec.gov/investor/brokers.htm.

Investment Adviser Public Disclosure Web site, www.adviserinfo.sec.gov/IAPD/Content/IapdMain/iapd_SiteMap.aspx.

Utah Division of Securities, www.securities.utah.gov/licensing.html.

This may sound time-consuming and difficult, but Alan B. Tingey, principal at Cannon Tingey Investment Advisors in Midvale, says it is up to the investor to do his homework.

"An investor would do well to seek an adviser that not only matches the investor's objectives, but also one that offers a simple, easy-to-understand compensation structure and is honest and forthcoming about how he gets paid," Alan says.

We'll tackle those payment issues next week.

If you have a financial question, please send it by e-mail to gkratz@desnews.com or by regular mail to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.


E-mail: gkratz@desnews.com