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Why Financial Planning Matters in the
Toughest of Times
Why enlist the services of a financial planner when your
holdings are down and you're facing a host of financial
problems? Because as dark as times may seem, you're actually
giving yourself a fresh start in building a stronger financial
future.
Indeed, many people don't make that choice. A recent
Financial Planning Association/Ameriprise Financial survey
showed that many people try to go it alone when it comes to a
financial plan — and they suffer considerably worse performance in
their investment and savings goals over time than those who do.
The cost of a financial planner may not be prohibitive due to
factors we'll mention below and young people have a particular
advantage on their side when using one — time.
Here are some things to know about the financial planning
process:
It's a collaboration and a learning experience.
A financial planner is not a substitute for your own final
decision-making. Planners serve as guides, editors and
strategists. They should begin by asking questions of you —
plenty
of them. Their purpose is to find out all the goals you have
right now — and maybe determine a few you haven't thought of.
Some of these dreams might include buying a home or business for
yourself, saving for college education for your children, taking
a dream vacation, reducing taxes and retiring comfortably.
Financial planning is the process of wisely managing your
finances so that you can achieve your dreams and goals — while at
the same time helping you negotiate the financial barriers that
inevitably arise in every stage of life.
Planners often specialize.
Planners, like any professionals, tend to specialize in
certain areas of interest, and they may receive continuing
education in more than a dozen areas of expertise. CERTIFIED
FINANCIAL PLANNER ™ professionals alone can earn continuing
education credits in asset management, employee benefits,
commercial real estate, insurance, investment management, estate
management, retirement planning, 401(k) administration, and
health topics, among others.
Ask about tackling specific problems.
If your problem is credit card debt or difficulty
refinancing, a planner may have specific contacts or the ability
to make certain recommendations on how to get yourself in a
better position to plan for the future.
They charge based on specific services.
Planners charge for their services in a variety of ways — always ask up front what they charge and how they expect to be
paid. Some "fee only" planners charge for a
consultation, plan development or investment management, and the
fees may be charged on an hourly or project basis depending on
the client's needs or as a percentage of assets under
management. Some charge commissions for the sale of financial
products they are licensed to sell, and others have hybrid
structures mixing fees and commissions. Discuss advisory
services first before committing to buying any particular
products.
They can talk about your personal investments as well as
the ones at work.
One of the best advantages to working with a financial
planner is the chance to have a second set of eyes look at your
wages, investments and benefits at work vs. what you'll be
investing on your own outside work-based retirement and other
savings plans. Be prepared to bring all of your finances into
the discussion.
May 2009 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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