What a Financial Planner Can Do For You

IF YOUR only financial plan is to stay one jump ahead of the bill collector, and you hardly have time to balance your checkbook, you may need help from a planner. This professional sells everything from general advice on your taxes, budgeting, retirement and estate planning to specific investments, such as mutual funds, life insurance and real estate, energy and other limited partnerships. Most planners work independently in a solo or group practice. Others are on the staffs of brokerage houses, banks, insurance companies and mutual funds.

The majority charge an initial fee to devise a written comprehensive plan diagnosing your financial ailments and prescribing monetary medications to achieve financial health. The plan generally will cost from $500 all the way up to $10,000, depending on three factors: your net worth or income; the planner's reputation; and whether the planner also charges a commission on any investments you buy from him or her. After you get the plan, you and your planner should review your finances at least once a year. This will cost you 30% to 50% of your original bill. However much you pay a planner, the cost is relatively modest compared with the potential long term rewards and risks of following his or her recommendations.

What can you reasonably expect from a financial planner? For starters, he or she should be able to calculate your net worth and devise a workable budget to help you meet your goals. After that, a planner should coordinate the specialized help you will need from such other professionals as a securities broker, accountant, insurance agent and lawyer. But do not expect a planner to take responsibility for running your everyday finances. That is still your job.

A planner will advise you to direct your investments into broad areas. For example, he or she may suggest that you should put half of your capital into stocks or stock mutual funds, one quarter into bonds or bond funds and one quarter into safe and predictable savings certificates. But because most financial planners are not stockbrokers or securities analysts, they tend to shy away from recommending individual stocks. Instead, they suggest mutual funds and limited partnerships that are professionally managed.

A planner suggests what you should do, but first he or she has to ask you several questions. How much risk are you willing to take? How important to you is it to reduce your taxes? How do you feel about borrowing to invest? As you answer, you often begin to realize that your attitudes toward money may not square with the way you actually spend and invest it.

Once the planner has a fix on your goals and how you want to reach them, he or she begins to make recommendations. For example, the planner will examine your insurance policies and your mutual funds to determine whether you have the right kind and enough of them. At that point, you are free to head for your nearest insurance agent or mutual fund dealer to do your buying. Or you can allow the planner to sell you the financial "products" he or she thinks you need. On such sales, the planner collects commissions of 1% to 10%, and sometimes more.