If you haven't started saving for retirement, or you've been saving but you're not sure it's enough for your old age, or you're so busy working that you don't have the time to think about your finances at all, then you may need a personal financial planner.
But -- and this is an important "but" -- be careful which planner you choose.
Personal financial planning was introduced into the world of financial services in the mid-1970s and became an overnight rage because it put so many finance-related skills to work.
Accountants audit financial statements and organize books. Investment advisers design stock portfolios. Lawyers write wills, and insurance agents structure life insurance coverage. Financial planners, however, do it all.
A personal financial planner can help you sort out your financial goals, plan a retirement savings program, design a fund for your child's education, decide where and how much to invest and attend to details, such as taxes, insurance and employee benefits, that most of us find too complex to handle on our own.
Unfortunately, such a broad range of services has also opened up the field of personal financial planning to abuses, some of which came to light with the change in federal tax laws in 1986.
The new laws prohibited many tax shelters that had been recommended by planners. "When those tax shelters blew up, people started asking questions," said Mary Malgoire, a partner in Malgoire Drucker Inc. of Bethesda and former president of the National Association of Personal Financial Advisers.
Soon thereafter, the Consumer Federation, a Washington-based consumer watchdog group, studied the financial-planning field and identified a number of instances of fraud, incompetence and self-dealing, particularly incidents in which "a planner recommends certain types of transactions because they earn him a larger commission," Ms. Malgoire said.
Many of the abuses stemmed from the manner in which planners were compensated for their work, she said.
Some planners work on a "fee-only" basis, charging an average of $100 an hour for research and advice. Others sell financial products such as stocks, mutual funds or insurance and earn a commission on what their clients buy.
Planners who care about their reputations won't let potential commissions dictate what products they recommend to their clients, said Harry T. McCrory, a Baltimore certified public accountant and financial planner who accepts commissions.
"Your client's needs come first, and your compensation comes second. If you do a good job for your client, your compensation will be fair," he said.
Despite its fall from grace in the hectic '80s, financial planning could undergo a resurgence in the fiscally conservative '90s, said Lyle Benson, an accountant with Towson-based Coyne & McClean, Chartered, and chairman of the Maryland Association of Certified Public Accountants' Personal Financial Planning Committee.
The aging "baby boom" generation is pushing the change, Mr. Benson said. "They had all those years where they bought, bought, bought, and now, as they near their 40s, they need to conserve," he said.
With advances in medical technology, retirements are lasting longer, meaning that nest eggs have to be started earlier and carefully managed, Mr. Benson said. At the same time, investments are more volatile. "Just look at Wall Street this year," he said.
If you want to work with a financial planner, you have to do your homework beforehand, experienced planners say.
Look for a planner with experience in the type of help you need, said Ms. Malgoire. If you want a household budget, you won't want to pick an estate-planning expert. Check all references and credentials with care.
Try to find someone who can communicate well, Mr. Benson suggested. "A lot of people in my profession know the tax code inside-out, but they don't have the skills to sit down with people, learn their goals, explain what they need and help them develop a plan," he said.
Most importantly, make absolutely sure you know at the start how, and how much, the planner will be compensated. If a planner balks at telling you that information, cross him off your list.
"If you're an unsuspecting consumer, you can get much more damaged by somebody who's doing self-dealing than you can by just going out and picking out investments yourself," said Ms. Malgoire.
Certified Financial Planner (CFP): Issued by Denver-based Institute for Certified Financial Planners. Requires completion of six-part study program; continuing education; adherence to code ethics; experience in financial planning. More than 21,000 people nationwide licensed to use CFP designation.
6* For free referrals, call 800-282-7526.
Accredited Personal Financial Specialist (APFS): Issued by New York-based American Institute of Certified Public Accountants. Requires CPA license; passing comprehensive exam; three years' documented experience in financial planning; six references; re-accreditation every three years; continuing education. Almost 400 CPAs nationwide accredited.
For free referrals, call 800-969-7371.
The Registry of Financial Planning Practitioners: Sponsored by Atlanta-based International Association for Financial Planning (IAFP). Requires registry with Securities and Exchange Commission as investment adviser; "recognized planning credential," such as CFP, CPA, law degree; passing "practice knowledge" exam; adherence to code of ethics; references; minimum of three years as comprehensive financial planner. Approximately 1,000 members.
For free registry directory, call 404-395-1605.
Chartered Financial Consultant (ChFC): Granted by the American College, Bryn Mawr, Pa. Requires completion of 10-course program; adherence to code of ethics; three years' experience in financial planning.
For referrals, write the American Society of Chartered Life Underwriters and Chartered Financial Consultants, P.O. Box 59, 270 Bryn Mawr Ave., Bryn Mawr, Pa. 19010.
National Association of Personal Financial Advisors (NAPFA)Buffalo Grove, Ill.-based organization of fee-only planners. Offers sample interview form with 20 questions to use in choosing a planner. For referrals, call 800-366-2732.
Linc Society: Nashville, Tenn.-based organization of certified public accountants who are fee-only planners. Because it is new, this group has only 100 members, but President Howard Safer says that "we have contacts all over the country." For referrals, call (615) 242-7351, ask for Mr. Safer and mention this article.
Maryland Association of Certified Public Accountants: Baltimore-based organization has a referral bureau that lists CPAs according to specialty. For referrals of CPA-planners, call 296-6250 or 800-782-2036.