Financial Planning: Everything You Need to Know About Your Money (Almost)
The guide to managing your finances, in good economies and bad.
(In a word, be patient.)
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Benjamin Franklin knew what he was talking about when he said, “A penny saved is a penny earned.”
“The power of compound interest is something you can never recapture,” says Carol E. Arnott, a certified financial planner with Greenville Financial Group in Greenville.
Imagine Franklin with access to a Roth IRA. There are so many financial products designed to help you save and grow your investments, selecting the ones that fit your goals can be complicated. Now that we’ve watched the Dow plummet to record lows and watched financial markets drop around the world, it’s more important than ever to manage your money prudently. Despite the news, there are tremendous opportunities.
We asked some of the state’s best financial planners for their advice. The initial panic about the economy may have faded, but good counsel is good counsel. Here’s what they had to say.
HOW TO FIND A PLANNER
Where do you start? Right here. Step by step:
Do some digging. Ask friends and family if they’re happy with their financial planner. If you’ve just moved to an area, search the Financial Planning Association’s list of Certified Financial Planners (www.fpanet.org/Membership/PlannerSearch). With names in hand, visit www.state.de.us/securities/index.htm to determine if any complaints have been filed against him or her.
Many planners today have specialties. Along with offering comprehensive financial planning services, for example, Carol E. Arnott helps divorcing spouses with their settlements. Some planners only take clients of high net worth. Others work with retirees. You’ll save time if you ask before scheduling an appointment.
When you meet with the planner, request details about his or her background, says R. Clifford Berg. Ask about credentials and what it took to receive them. Was it a weekend course, or an intensive program? Also ask if they belong to professional societies.
Ascertain the fee. Don’t be afraid to talk about compensation. “You need to establish the rules of engagement early on,” says Cynthia Hewitt.
Many financial planners have a fee for preparing a financial plan, which will vary depending on the complexity of assets and the client’s goals. The client then has the option to implement the plan with that firm for additional compensation. Some planners charge a management fee, which is often an hourly rate or a percentage of assets under management. They take no additional compensation from the sale or the management of a product. Other planners work on commission. They may or may not charge a set fee for the plan.
Which one is for you? It depends in part on your comfort level, Hewitt says. It also depends on the anticipated account activity and whether it’s more cost-effective to pay a fee rather than commissions.
Discuss the available products. Some planners only have access to a company’s products or company-approved products. They can only offer what is in-house. Others have greater flexibility and a wider choice.
Look for warning signs. Head for the door if the financial planner:
• is not a good listener;
• does not respect your risk tolerance;
• tells you that it’s OK if you don’t understand the investment because he or she will take care of it;
• brings up offshore accounts or investments in exotic locations;
• launches into a hard sell;
• promises above-market rates of return;
• indicates that an investment is guaranteed—a word many firms forbid their planners to use;
• does not discuss your goals.
Page 2: Planning Through the Decades