Identify What Kind of Financial Advice You Need

Am I on Track?

Before you visit a potential adviser, think about your personal situation and how you'll present it. A typical couple in search of financial advice are Carol Bischoff, 63, and her husband, Dick, 70. The Bischoffs, both retirees, spend warm months in Maine and winters in Florida in two homes that are mostly paid for. They have enough in their IRAs and mutual funds, plus Social Security, to last for decades, even if they invest conservatively.

But Carol, in particular, is antsy. She recently dismissed her stockbroker when she experienced some market losses that she felt the broker could not adequately explain. With real estate values falling and living costs up, Carol seeks a generalist who can tell her whether she and Dick are on track.

How much can they afford to spend on travel and recreation? Is there a circumstance that could force them to sell either residence? Knowing those things, she and Dick could tweak their securities on their own. "We have never shown anyone the whole picture of our investments, debts, expenses and needs," says Carol.

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The Bischoffs' best fit would be a financial planner who puts emphasis on life events and goals before dissecting a portfolio. The Alliance of Cambridge Advisors) and the Kinder Institute of Life Planning are networks of advisers who have tax and investment expertise but are trained to analyze people's lives beyond the size of their bank balance. For example, a Kinder planner might tell you that your retirement contributions are inadequate -- not because your mutual fund expenses are too high but because you spend too much on clothes and entertainment.

Many people use investment setbacks as a springboard to consider -- or reconsider -- financial advice. Jerry Wahl, a 64-year-old pharmacist from Dickinson, N.D., is unhappy because his $300,000 IRA is down about 8% in 2008 and has gained a total of 23% since he signed up for Fidelity's portfolio-management service, for which he pays 1% a year, in June 2004.

Since then, Fidelity's Freedom 2010 fund has returned a total of 24%. "I'm thinking I could just invest in a Freedom fund and save the $3,000 a year in advisory fees," says Wahl.

Wahl may be on to something. His assortment of funds, selected in concert with his Fidelity adviser, is extremely aggressive for an investor who expects to begin withdrawing money in two years. Fidelity Freedom 2010, which has half of its assets in bonds and cash, is a much more appropriate choice. In return for his $3,000, Wahl gets two or three consultations a year, but he's not impressed. He might be better served by paying $150 an hour for ad hoc advice when he feels he needs it. Or he could simply do some research himself -- for free.

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