Financial Planners

Whether you're saving for retirement or your children's college fund or wondering how best to make the most of your money, financial planners say they can help consumers set and reach achievable goals.But consumers would be wise to first do some research of their own -- on financial planners.Most planners carry a designation awarded by a college, board or association, each of which sets its own standards for education, experience and ethics.For instance, there are certified financial planners, chartered financial analysts, chartered financial consultants and accountants, among other types of advisers.

Pop singer Michael Jackson's and his new fiancee's is the latest grist for the tabloids. Donald Trump and Marla Maples' pre-wedding deal, of course, was the stuff that kept Manhattan gossip fires burning. And the details of Oklahoma couple Rex and Teresa LeGalley, in which stipulations such as what brand of car fuel they were allowed to buy, were so bizarre as to make even hardened lawyers wonder how far the marriage vows could be stretched.The question, then, is do you need a prenuptial agreement?

FOR FINANCIAL planners and investors who use them, this month marks the changing of the watchdogs. It has opened a hole in the investor-protection net.Until last Tuesday, investment advisory firms, including financial planners who give investment advice, had been regulated by the Securities and Exchange Commission.The SEC rarely got around to checking planners, especially the little guys. But at least the planners were making key disclosures on the SEC's form ADV (for "adviser").The ADV, Part 2, lists the planning firm's services and investment methods, the principles' education and business background, and the way customers are charged.

Peter Boulware stands 6 feet 4 and 255 pounds. He specializes in crushing quarterbacks, running backs, and almost anyone else who doesn't play for the Baltimore Ravens.He is regarded so highly that the Ravens made the 22-year-old junior from Florida State University their No. 1 draft pick and dug deep to win his services -- $18.5 million over six years.But what is someone who has just hit the jackpot supposed to do with all that money?Boulware is not unlike the lottery player with the winning ticket, or the entertainer who suddenly hits the big time, or the widow who inherits a huge sum of money.

If season ticket holders for the Carolina Panthers are a presage, those who purchase "personal seat licenses" in Baltimore may reap a financial windfall in the years to come.People in Charlotte, N.C., who purchased seats for their NFL team are seeing a stunning and unexpected explosion in the resale value -- before a single game has been played in the city's new stadium -- and some investment experts and financial planners say the same thing could happen here.In an attempt to raise millions of dollars, the teams in Charlotte and Baltimore are requiring fans to purchase "personal seat licenses."

Struggling through the jungle of mutual funds to find one that won't bite you in the wallet is getting tougher as more and more funds, ravenous for your cash, keep appearing.Financial planners and money managers who set up portfolios of funds for their clients must make that trek regularly. So several were asked what criteria they use in determining which funds to buy for their clients.Good performance is a given. But the planners used three words constantly in explaining how they determine what caused a fund's performance: "managers," "risk" and "Morningstar."

IF YOU WORK with a financial planner, some valuable new disclosures will be coming your way. Thanks to a law just passed by Congress, plus a new initiative by state regulators, you'll be able to learn a lot more about the person who guides your investment decisions.The new rules cover investment advisers. That doesn't mean stockbrokers. You already have access to a stockbroker's background and disciplinary history, just by calling your state's securities commission.vTC Investment advisers manage your assets or advise you on how to manage them.

It's a matter of trust. Americans worry about their money and wonder exactly whom they can trust with it.With about a half-million stockbrokers and 100,000 financial planners doing business in this country, finding the trustworthy isn't always easy.Sometimes steps must be taken to make sure professionals remain on the up-and-up:* In the brokerage industry, Prudential Securities has agreed to pay $371 million to settle charges that it defrauded 400,000 investors. Most of the money will go to individual investors who can prove they received false promises or were cheated.

A story in the Sunday Business section listed an incorrect phone number for the American Institute of Certified Public Accountants. The correct number is: 1-800-862-4272.The Sun regrets the error.Financial planners had several chances to continue raising the standards of their profession in 1992, but couldn't manage it. Maybe they'll do better in 1993.The delay is unfortunate for the industry, because as people start putting their income tax records together in the next few weeks, many will once again ask themselves whether they need long-range financial and investment advice.

What would happen if your brokerage firm went bust?That's just one of the questions answered in a free, 39-page booklet from the Securities and Exchange Commission.The booklet, called "What Every Investor Should Know," outlines the various functions of the SEC. It also defines some of the most common -- and not so common -- investments.To order a copy, write to SEC, Publications Unit, 450 Fifth St. N.W., Washington, D.C. 20549....* Like all professionals, financial planners come with a variety of strengths and weaknesses.

What a difference five years -- and a recession -- make. When financial planners were asked in 2004 for the most frequent questions from clients, the queries were largely about investing in real estate, how big of a mortgage they could swing and whether to buy or lease a car. The real estate market has since imploded, and many homeowners and would-be real estate moguls are underwater on mortgages. And the government is now giving money away to get consumers to buy or lease new cars to rescue the auto industry.

Donald Trump published The Art of the Deal in 1989, right before heading into bankruptcy court. But the Age of the Deal really started years earlier. Maybe it was in 1987, when Michael Milken made more than half a billion dollars on junk bonds. It could have been 1983, when William Agee unfurled one of the first golden parachutes after selling Bendix to Allied-Signal. Or how about 1980, when the American Medical Association removed its ban on kickbacks - oops, I mean "referral fees" - paid to doctors?

Investment manager Louis Holland, of Holland Capital Management, posed the right question on a looming national retirement crisis. In essence, it was this: Given the fact that 43 percent of Americans are on their way to having less retirement income than they will need, what can business and community leaders do about it? The answer from a panel of investment experts that Holland moderated recently at The Economic Club of Chicago pointed to an obvious answer: Give employees more education.

I am a 58-year-old male, and might be losing my job soon. I don't think I will be able to get another decent job, and my wife makes only $19,800 at her full-time job. I will be able to get health insurance through my wife's employer. We owe $117,000 on our home, and I'm thinking of removing $170,000 from my 401(k) to pay off the mortgage and cover the 401(k) taxes. I'm paying 5.63 percent on my mortgage and doubt that I would make more than that if I kept investing the 401(k) money, because I am a conservative investor.

I've had the chance to speak candidly to financial planners. Now allow me to do the same with you. Last month, at the invitation of the editors of the Journal of Financial Planning, I wrote the "Back Page" essay for the monthly magazine, published by the Financial Planning Association. Bruce Most, a senior editor at the magazine, told me he wanted something "thought-provoking, inspiring, provocative, lively or controversial." He left the topic up to me and said the essay would be an opportunity to speak directly to 50,000 of the nation's top financial planners.

The equity you build up in your home is not a retirement-savings account, although many Americans are tempted to think that it is. The smartest way to think about home equity, financial planners say, is as a cushion, a spare tire in reserve just in case savings calculations are off or liquid assets run out. Shelter is a necessity, and so many planners classify the home as a "use asset," a consumer need in the same class as a car or sofa. "It's a place to live, not a brokerage account," said Sherman L. Doll, a personal financial specialist with Capital Performance Advisors in Walnut Creek, Calif.

The next time you go to a financial consultant for help with your investments, you may receive a document that is supposed to make it easier for you to figure out whether that person is truly out for your best interests. But there's a risk that after you've read it, you will be more confused than ever before. Read the document like a cigarette label. In essence, it is warning: "This broker might be hazardous to your wealth." It won't read that way, however. Instead, it begins with: "Your account is a brokerage account and not an advisory account.

So, you've resolved this year to put your finances in the hands of a professional. That's the easy part. Figuring out what kind of professional to hire is more difficult. Lots of professionals are eager to help handle your money, and often have similar-sounding titles. For example, an investment adviser and financial adviser may seem the same, but their legal responsibilities to investors are quite different. On top of that, a professional might hold one or more designations, indicating an expertise in a certain area of finance.

DOES a broker by any other name still smell the same? Two recent investor surveys offer a disappointing report card on our collective wisdom about the professionals standing behind our money decisions. The first, a national poll of 1,044 investors sponsored by the Consumer Federation of America and an alliance of financial planners, found that 53 percent look to stockbrokers for more than assistance with transactions and that 28 percent believe giving advice is the primary service a broker performs.

MANY PEOPLE have the same financial questions, whether they are executives earning a generous six figures or grade-school teachers making a fraction of that, financial planners say. What size mortgage can I afford? Do I need long-term-care insurance? Should I buy or lease a car? And this year, people are bombarding advisers with questions about how to become a real estate investor or whether the outcome of the presidential election will affect their investments. "There are a certain number of questions that we go over and over and over again," said Sheryl Garrett, a Kansas financial planner and author of Just Give Me The Answer$.