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Wednesday, August 07, 2013 12:00:13 AM

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Do You Need A Financial Advisor?
If you do your own investing, have you ever wondered whether you should turn things over to a professional advisor? This article attempts to shed some light on this topic and to provide you with some things to think about so that the best decision can be made.

When the Time Comes
Professional advisors say there is no magic asset number that pushes an investor to seek advice. Rather, it is more likely an event that spooks a person and sends him scurrying through an advisors door. The event could be something that requires the individual to manage an asset himself.

According to Charles Hughes, a certified financial planner in Bayshore, New York, the event typically involves either the receipt of or access to a large sum of money that the individual didnt have before.

When you reach a point in which youre constantly afraid that youre going to make a mistake with your investments, then you need professional advice, according to Raymond Mignone, a certified financial planner in Little Neck, New York.
Often, someone who has never spent or managed more than a few thousand dollars is looking at managing a six-figure or group of accounts.

If this happens to someone just about to retire, the decisions that need to made are more critical, as the retiree will want to make this money last. As such, people often seek professional advice just before they retire, because they feel that they need professional advice to make such long-term decisions.
When it comes to portfolio management , it is important to determine your plan of attack. Take the 401(k) plan, for example. When youre contributing to the plan, you may feel like its not your money. You cant do with it what you want because youll be penalized. But when retirement is coming and you can access that money, the question often arises about what you are going to do with it. For many, this can be when they decide whether they can manage their own affairs or whether they should seek professional advice.

Judging Yourself
The need for critical self evaluation is vital when determining whether or not to hire a financial planner. Advisors say the decision depends on the investor.

The following questions should help you sort out if you need an advisor:
• Do you have a fair knowledge of investments?
• Do you enjoy reading about investments and doing research?
• If you have expertise in investments? Do you have the time to monitor and evaluate them and make periodic changes to your portfolio?
If you answered yes to the above questions, you may not need an advisor or financial planner.

Not So Fast
However, Loren Dunton, one of the founders of the financial planning movement, says that many people who believe that they dont need a financial planner could benefit from one anyway.


Most people need a planner. The ones who dont need one are usually smart enough to use one, wrote Dunton in Financial Planning Can Make You Rich (1987).

So lets assume someone decides that, for any of the reasons stated above, he or she does need an advisor. Theres another difficult task: Finding the right advisor.
Finding the Right Financial Professional
How do you go about finding the right advisor? You should begin by asking for referrals from colleagues, friends or family members who seem to be managing their finances successfully. Another avenue is professional recommendations. A Certified Public Accountant or a lawyer might make a referral. Professional associations can sometimes provide help. These include the Financial Planning Associating (FPA) and the National Association of Personal Financial Advisors (NAPFA).

The client must also decide how the advisor will be paid. Some advisors charge a straight commission every time a transaction is recorded. Other advisors will charge a fee based on the amount of money they have been given to manage. Some fee advisors assess an hourly fee. As such, fee advisors can be very expensive, which could put them beyond the reach of many middle-class clients.
Fee advisors claim that their advice is superior because it has no conflict of interest. In other words, using an advisor paid through commissions, which is a payment received by an advisor or a broker whenever a transaction is recorded, can compromise an advisors integrity. As such, those who advocate fee advisors suggest that commission advisors may have an incentive to record too many transactions. However, commission advisors argue that their services are certainly less expensive than paying fees that can run as high as $100/hour or more.

The Wrong Advisor
If your advisor only records some transactions from time to time but never sits down and discusses long-term goals with you, you may want to look for a new advisor. Similarly, if you advisor never writes an investment plan to lay out your goals and assess whether they are being reached, you may be better served elsewhere.

A written plan for each client is critical. In addition, good advisors have semiannual conferences with clients and talk to their clients on a regular basis. In addition, a good advisor who is just beginning to work with a client should never recommend a product until he has learned a lot about his or her circumstances and goals. (For more insight, read Find The Right Financial Advisor.)
Finally, the individual should ensure that any financial professional has the proper credentials. Avoid any advisor who is little more than a broker, but calls himself a financial planner or advisor.

Many planners or advisors are only sellers of financial products. In fact, the term financial planner has been a much-abused term. A person can label him or herself as a financial planner, but not be a certified financial planner unless he or she has fulfilled the necessary credentials. Therefore, dont allow yourself to be impressed by the title on an advisors business card until you understand what qualifications and certifications he or she actually has.

Conclusion
The decision about whether or not to seek advice can be critical. If you do choose to seek advice, carefully choose the right professional for the job and you should be on your way to a better financial plan . If you decide to go it alone, remember if at first you dont succeed, you can try again ... or call an advisor.

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