Investing My Muffin and a Cup of Coffee With Their Help

I was lucky in that I learned the basics of investing and checkbook management at an early age. But what if you aren't so lucky? What if you don't have a clue? What if you didn't realize your morning muffin and coffee ALONE can turn you into a millionaire at retirement? What if I don't have the knowledge, time or inclination to do this all by myself? How am I supposed to find someone who can help me? Keep these thoughts in mind before you trust someone else with YOUR hard earned money.

We have been with our financial planner for about 15 years. We used to do it all by our lonesome selves. We read some of the financial magazines and picked from the top recommendations in mutual funds. But, as I mentioned once before, past performance does not mean the fund will continue along in that direction. In fact, most times, they go the opposite direction and probably already hit their high point right when you jumped in! Some people even pick the losers, saying the only way to go now is back up! Before long, you find you are wasting your time or have no real sense of direction. Plus, I know we kept second guessing ourselves. Inevitably, you sell the losers and buy the winners...when in fact you should be doing the OPPOSITE! I admit, we've done that!

So, there we were....not doing a very good job of it and getting more discouraged in the process....to the point of just throwing our hands up and saying...whatever. We were really at a loss of what to do next! We just knew we needed some help. How do you find the right person? An honest person who will look out for your best interests. Back then, there weren't that many resources on the internet...like there are now. We ended up going with a planner who had been doing the financial planning for my husband's family, for many, many years. We already knew him, his family and his personality. He had many years of experience as a planner. He had the memory of an elephant, was licensed, had no disciplinary action against him and took the time to find out more about our financial situation and our goals before he even started talking investing. He told us right away that we need to be focused for the long haul. Don't watch the market as it goes up and down...because it will...but look at how it reacts in the long term. He reminded us to look back at the market 10 years ago, 20 years ago...is the value now higher than it was back then? Has it beat inflation? Yes! Well, that's where you want to be...nothing less and nothing more needed to make your millions and a comfortable retirement.

You are probably asking...well, how do I find someone? Other than talking to people you know in your community and your circle of friends and making appointments with random financial planners in your area, you can check a few resources online. But there are so many directories and databases out there too!

Many of you know I listen to Dave Ramsey...lots of good sound financial advice from that man. He does have financial planners he does endorse, and you can find them on his website. Dave just doesn't endorse anyone, so I would think he does at least a little background checking before he allows someone to be on his list. Use this as your starting-off point in researching planners. Narrow down your list to three to five certified and registered financial planners. Be sure to ask them these questions.

• Ask the planner how they are compensated. Are they fee-based, meaning they charge a flat fee per month, per year or per value of your portfolio? Are they commission based, meaning they profit only when they sell you a financial product? Be sure you understand completely, how they make their money. If they are fee-based, you do have to keep an eye on them, to make sure they periodically re-balance your portfolio and that they sit down with you at least once a quarter to discuss where you're at. They also may not be as motivated as a commission-based planner because they get money whether they do something worthwhile for you or not. A commission based planner can be tricky too. Are they selling you an investment just to make themselves money? Do you find yourself buying and selling a lot of investments over time? Investing should be done for the LONG TERM. You should not be doing a lot of buying and selling and you should be taking fees into account when you calculate your rate of return! Ask them about ALL the fees of a fund, not just is it front-loaded, no-loaded or whatever else. Not all fees are listed in the company prospectus for each fund.

• Ask about their professional background. No, this is not rude, it’s expected, and you're about to put your money in their care. Find out how long they have been at their company (or on their own) and what their schooling is. Be sure they are not just an insurance agent or a stockbroker. You will get hosed if they are, and they are just not working in your best interest here…just theirs. Anyone can hang out a shingle and say they are a financial planner. I also like to see a background in accounting, finance, business or law.

• Ask if they are registered by the SEC? If not, wish them a good day and get on out of there. In fact, get this information even before you make an appointment. Any financial planner committed to what they are doing should be registered.

• Ask for their CRD number. You can get a free report on the financial planner, as well as their employment background and any possible disciplinary action. Check out the Central Registration Depository. You can look up the broker as well as the company itself.

• Don't go with a planner just because they are a friend. Friends and money just aren't a good mix..most of the time. We are talking about your life savings and not a small favor. You have to be more diligent than that! Don't let this be your only criteria.
  

• Hire someone who has been in the business at least 10 years. You want someone who has gone through some market ups and downs. When it comes to your money, you really need someone with experience and someone who doesn't react to everything the market dishes out on a weekly or even yearly basis!
  

• Ask what their investment philosophy is. You want to know what their strategy is and how they see investing your money. Make sure you understand what they are saying. You are not stupid. If they can’t explain in plain English, then they are not the planner for you, and THEY are the stupid ones for not making themselves understood.
  

• How does the planner actually pick the investments? Does he go with new ones or tried and true ones from the past? Does he like to try a lot of new things? Does it follow along with something you’d be happy with? Does he sit and listen to your entire financial situation and then make a determination? Does he ask about your debt and mortgages and other areas of your life? Or does he talk immediately about some investments he would recommend?

• Get references. I realize some will say they cannot do this because of some kind of client/planner confidential relationship. Tell the planner that you need this to get a warm and fuzzy feeling or you will have to move on. Most will comply, and frankly, they should already have a list of ready clients who have already agreed to do this beforehand. You are not going to call these people to ask how much money the planner made for them. Every financial situation, years invested and circumstances will be different for each person. Past performance is no indication of what the future holds. Ask for at least three clients who have been with him at least three years. Call and ask them if they are happy with their planner. Ask if he is what they expected. How often does he contact them and rebalance their portfolio? Is he pushy? Does he explain things? Does he give other ideas such as in life planning, taxes and other areas of your life that would affect you financially?

• Does he have a personalized plan? Is he asking you things like your job situation? How old your kids are? How old you are? Your insurance status? Don’t settle for a generic blueprint.

• How often will you meet and/or talk? He’d better say at least quarterly. Your portfolio might get too top heavy in one area and may need to be re-balanced. He should be watching this and reacting accordingly.

• Do I feel comfortable with this person? Do you have a good feeling being around him? Does he seem to look down upon you? Is there something not quite right there but you can't put your finger on it? Does he make inappropriate comments or jokes? Then go ahead and pass on it. You want someone you can talk to and feel comfortable with. This person is someone you should be knowing a long time, so get started off on the right foot here.

With all that being said, ultimately, YOU are responsible for the care and management of YOUR money. Don't ever put it ALL in the hands of ANY financial planner without oversight. Be prepared to be involved. See what they are doing. Realize what the fees are. Understand your true rates of return and any tax implications. Have a financial plan and a sense of direction of where you want to go. Are you saving for a big purchase? Your retirement? Kids' college? What?! Your planner is who is going to help you do this..not take over and you wash your hands of the whole thing!

How do you go about your finances? Do you have a planner? Do you do everything on your own? How do you feel about that?

Please be sure to stop by the Carnival of Personal Finance #142 to read more informative personal finance articles!