If you are an individual of any age planning to buy a home, to educate your children or save for retirement, your problems are complex. You may be dealing with an attorney, an accountant and an insurance agent, and ignoring the services available from a personal financial planner with multi-disciplinary skills.
Or if you are the owner or chief executive of a corporation, financial planning is even more complex. You may be receiving advice from a couple of attorneys, a corporate and a personal accountant, several insurance agents, a real estate adviser, a corporate appraisal firm, and the corporate controller, treasurer and legal counsel. Who sorts out and integrates all this advice?
Financial planning is a relatively new business, scarcely a quarter-century old. It is still defining itself, still developing ethical standards and testing the competence of practitioners. Yet the number of people claiming to be financial planners continues to grow.
The reason: both middle- and high-income families find it difficult to sort out the growing volume of information available from the press, seminars and salespeople to make sound investment decisions, to understand the tax laws and to evaluate the scores of new financial instruments advancing technology has created. Inflation, volatile interest rates and a turbulent economy have added to the uncertainties individuals face and underscore their need for help.
Financial planning is a process of gathering personal financial information, analyzing the client's position, developing a plan for achieving the client's objectives, getting the client's approval, implementing the plan and revising it periodically as needed, according to Robert M. Crowe, professor of finance and insurance at The American College.
Professional financial planners emphasize that they are not "money managers" who take charge of your affairs and solve all your problems. "What I would look for is somebody who has the skills to link me up with the appropriate specialists -- lawyers, accountants, bankers and real estate managers," says Roy C. Ballentine, a chartered financial consultant, of Wolfeboro, Mass.
The speed with which many reservists called up for active duty xTC found themselves in the Persian Gulf has spotlighted the problem: Who will handle your finances if for some reason you cannot? It could be a call to active duty, a trip out of the country or a disabling illness.
A businessman plans to take a nine-month trip abroad with his wife and children, including weeks at sea, in an example cited by Ballentine. Not only was he required to get his business affairs in order, but he had to solve the problem of maintaining his home. He decided to put $30,000 in a joint bank account, with his secretary authorized to make withdrawals. Instead, on the advice of his planner, he is opening a money market account, which will earn interest. He has signed a simple trust agreement that appoints his secretary as trustee, placing her under the fiduciary laws.
In such situations, should you give your financial planner or your lawyer a power of attorney? The business executive in Ballentine's example signed more than one, to be held by his attorney. The reason: it is conceivable a situation could come up requiring immediate attention and the person designated may be unavailable. Ballentine advised the executive to have a back-up. Peg Downey, a certified financial planner of Silver Spring, Md., helped her reservist clients get their affairs in order and suggested a power of attorney.
But F. Daniel Bell of Raleigh, N.C., an attorney and consumer representative for the National Association of Personal Financial Advisors, has reservations. It is a matter of trust, says Bell, and the power of attorney should be used with great discrimination.
"I would not want to give a power of attorney to anyone other
than my spouse or next of kin. You will find that the wife of a household is more involved in the financial affairs of the family and has a greater degree of capability than wives did in our parents' generation," Bell says.
Wives today are equal partners, Ballentine agrees. Downey says that her clients, no matter their age, keep no financial secrets from their spouses. "The women's movement and the fact that so many more women are out in the work force" have seen to that, she says.