Build Your Financial Dream Team

By the editors of Kiplinger's Personal Finance

published 16 April 2012

Most of the time, you probably do fine managing your own finances -- that’s why you read Kiplinger’s in the first place. But every now and then, you may need help from a professional. It can be tough to turn over your money to someone else, so use our advice to vet each expert. Start with recommendations from people you already know and trust -- but don’t let that be the last word. Check credentials and interview a few candidates to find someone you’re comfortable with. After all, your money is at stake -- and so is your peace of mind.

SLIDE SHOW: 8 Financial Professionals You Need on Your Side

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WHY YOU NEED ONE: Saving for retirement or some other long-term goal is a big reason. Most planners recommend portfolios of mutual funds based on your time horizon and risk tolerance. But there are hundreds of other reasons to seek help. Most common are stage-of-life hurdles -- compensating for a pension freeze, for instance, or juggling saving for college and retirement. Perhaps you and your family suffer generalized financial anxiety and need an expert to get everyone’s emotions under control.

Some issues -- for example, managing a large lump-sum payout -- require comprehensive analysis and lend themselves to a long-term engagement with a planner or group who become your family’s financial “emergency team.” Other issues, such as whether to buy a home or keep renting, call for only a brief consultation. A few planners specialize in fast solutions to well-defined problems. (One calls his three-hour engagements “tune-ups,” as opposed to “overhauls.”)

HOW TO FIND THE RIGHT ONE: Start by matching your needs with candidates’ strengths. Planning organizations have Web sites with state-specific search engines and links to planners’ sites and regulatory disclosures. The National Association of Personal Financial Advisors, or NAPFA, enrolls fee-only planners, who either charge by the hour or charge a percentage of assets under management if you hire them to manage your investments. The Financial Planning Association is the largest professional group, with 24,000 members. Many NAPFA members also belong to the FPA, although the FPA also has planners who are commission-based insurance agents and securities brokers.

WHAT YOU’LL PAY: Costs are all over the place. You’re likely to lay out four or even five figures for comprehensive advice. Hourly rates commonly run $200 to $300. Most planners do some small jobs, but they spend most of their time on permanent clients who pay a percentage of their assets under management -- typically 1% or 2%, depending on the size of the account -- or a percentage plus an annual retainer of, say, a couple of thousand dollars.

The terminology can be opaque. For example, you’ll see references to “fee-based” planners, which are not the same as “fee-only” planners. Fee-based payments start with a flat fee and add a percentage of your investments, plus commissions for the sale of mutual funds, annuities, life insurance or real estate partnerships. The trend among planners is away from commission-based planning, which can lead to uncomfortable sales pressure.

You can discuss billing in your introductory meeting. First, however, check the planner’s Form ADV Part II, available at www.sec.gov or via a link on the planner’s Web site. Among other details, you’ll see current rates for different services, the number of clients the planner handles, and the percentage of time he or she spends on different kinds of jobs. Establish upfront what and how you’ll pay for everything the planner will do on your behalf, including two or three progress reports a year and any emergencies that crop up.

WHAT TO ASK: As the saying goes, you are the client -- not your money. You need to know whether you’ll have regular access to the planner’s time and thinking (twice a year is usually enough) and whether you can call with a question or for a quick consultation without getting charged $150 every time. Does the planner have other clients like you—for example, preretirees, blended stepfamilies, ex-military families, widows or widowers, or the self-employed? Does he or she have the expertise to address problems that involve, say, legal or tax issues? Some planners may strike you as generalists, which could work fine if there are lawyers and accountants in-house or on retainer to address technical questions. (For more questions to ask, see our 5 Questions to Ask to Find the Right Financial Planner.)

Your toughest call may be whether to give a professional discretion over your investments. If you do, be sure you agree on particulars, such as whether you prefer index funds or actively managed funds, whether individual securities will be in the mix, and how comfortable you are with frequent trading versus a patient approach. If a planner is unduly eager to take over your accounts, forget it. -- Jeffrey R. Kosnett

WHY YOU NEED ONE: Most likely, you can get all the investment advice you need from a financial planner -- especially if you’re mainly looking for mutual fund picks and someone to help you stick with an investment strategy. Likewise, the fund company or brokerage where you park most of your money probably dispenses free basic investment advice and more-complex advice for a fee -- which is often waived if you have, say, at least $100,000 in assets with the firm. But you may need an investment adviser (also called a money manager) because you want or need more-expert advice.

That could be the case if you have many financial goals or a complex financial situation and need a professional to play quarterback. Or you may want to invest in assets that don’t come in off-the-shelf products, such as venture capital, hedge funds or private equity, and need special expertise. (To invest in those things, you must be an “accredited” investor, meaning you have assets in excess of $1 million or annual income of at least $200,000 for an individual or $300,000 for a couple.)

Unless you live in a large metro area, the odds of finding a crack investment adviser nearby with just the expertise you seek is slim. But for hard-core investing advice, you don’t need someone close by. Once you have several candidates, check their qualifications, background, strategies and fees. The shortcut for this is the adviser’s Form ADV (see the “Financial Planner” section, above).

WHAT TO ASK: First, find out the performance record of the advisers you interview, which should at least match the averages of markets in which they invest, after expenses. Ask for a list of clients with situations similar to yours that you can speak with. Also find out how you can monitor your account. You should have easy access to it through a third party to guarantee that the numbers the adviser advertises are legit. -- Robert Frick

WHY YOU NEED ONE: It’s bad enough thinking about death or dying, but paying a lawyer to help you ponder the inevitable? Ugh. Still, you owe it to yourself and to your family to assemble the documents that will smooth your way at the end of life and secure the well-being of those you leave behind. These documents include a will; a financial and a medical power of attorney, which let others make financial and health care decisions for you when you cannot; an advance medical directive, which spells out your preferred end-of-life care; and in some cases, a revocable living trust, which lets your estate avoid probate.

You could create some or all of these documents at a do-it-yourself site such as LegalZoom.com or RocketLawyer.com for $70 or less. But the DIY route is “fraught with pitfalls,” says Gideon Rothschild, of the Real Property Trust & Estate section of the American Bar Association. Neglect to have certain documents witnessed, for instance, and you render them useless. At the very least, have an estate-planning lawyer review the documents to see that they are properly executed.

An estate-planning attorney can offer guidance on important issues, such as choosing the right person for your power of attorney and deciding whether to set up a trust. He or she can also give you a heads-up if the size of your estate approaches estate tax territory and help you plan accordingly. (Although the federal government sets a high threshold -- currently $5,120,000 -- for federal estate tax, many states have much lower thresholds.)

HOW TO FIND THE RIGHT ONE: You can get referrals from your accountant, financial planner or investment adviser and from your state and local bar association, which may also post complaints made against local lawyers. Some lawyers’ organizations are simply membership groups, but the American College of Trust and Estate Counsel, for estate-planning lawyers, is an invitation-only organization whose membership is of “the highest caliber,” says Rothschild. To find a member in your area, go to www.actec.org.

WHAT YOU’LL PAY: Fees range from as low as $250 an hour to as much as $1,000 an hour, depending on the firm and the location. Figure you’ll pay at least $1,000 for a will and end-of-life documents, and $3,000 for a plan that includes a trust; in high-cost areas, the total bill will likely be double those amounts. Some lawyers charge a flat fee rather than an hourly rate, or a combination of the two; find out what services are included with each arrangement, and ask whether the attorney offers a free consultation.

WHAT TO ASK: Before signing on, ask what percentage of the lawyer’s practice is devoted to estate planning. A couple of estate plans a month does not constitute a specialty, says Danielle Mayoras, an estate-planning attorney and publisher of www.trialandheirs.com. “You want someone who’s living and breathing this subject every day.” If your plan involves charitable giving, complicated taxes or extensive real estate, find out how much experience the lawyer has in those areas. -- Jane Bennett Clark

WHY YOU NEED ONE: There’s tax planning and slogging through your annual return, of course. But some accountants will also take a big-picture view of your finances and set up a system for managing and reviewing them. Specific areas accountants may cover range from managing retirement accounts to saving for college to estate planning. If you have an aging parent who struggles with financial tasks, consider hiring an accountant if you can’t fulfill the duties. Sharon Cook, president of the National Society of Accountants, says she pays bills and balances bank accounts for elderly clients and offers guidance to those left holding the reins after a spouse dies.

When it comes to taxes, an accountant’s help is suitable in a number of situations, says Melissa Labant, director of taxation for the American Institute of CPAs. Perhaps you’re not comfortable digging through tax rules, or you don’t have time to do it. Life changes that affect your taxes, such as getting married or divorced or having a child, are good reasons to consult an accountant. And you may want a hired hand if changes in tax rules affect you.

HOW TO FIND THE RIGHT ONE: In most states, anyone who calls himself an accountant must pass the rigorous certified public accountant exam and be licensed with the state, though non-CPA professionals can provide similar services. Beyond that, credentials indicate whether an accountant’s expertise meets your needs. CPAs with the Personal Financial Specialist (PFS) designation are trained in financial planning for individuals. The Accreditation Council for Accountancy and Taxation issues credentials for business accounting, retirement advising and tax advising. If you’re focused on tax prep, note that all tax preparers must be enrolled with the IRS and have a Preparer Tax Identification Number, or PTIN. (Only enrolled agents, CPAs and lawyers have unlimited rights to represent taxpayers before the IRS.)

WHAT YOU’LL PAY: Prices vary considerably by region and by the type of work. Cook estimates that in her city of St. Louis, an hour of consultation runs about $75 to $150. A top-tier CPA who works with higher-income individuals might charge $200 to $250 per hour, says Rick Telberg, president and CEO of CPA Trendlines Research. In 2011, the average price to have a tax preparer or accountant fill out an itemized Form 1040 with Schedule A and a state tax return was $233, according to the National Society of Accountants. A 1040 with itemized deductions plus a state return at H&R Block starts at about $170.

Because training and credentials for computer troubleshooters vary so much, your best bet is a referral from a friend who has used one successfully. When you call a firm, the technician should be able to give you a quote for remote help, whether by the hour (rates are typically around $100 per hour) or for a specific service. House calls cost extra. If you don’t have a referral, check out Best Buy’s Geek Squad or Geeks On Call. Geek Squad offers wireless networking help starting at $90 online or in-home.

If no one is responding to your résumé, or you land interviews but not offers, you may want to enlist the help of a career coach or counselor. There is a difference between the two -- anyone can be a coach; counselors must be licensed -- but either may be able to aid in your quest. The best way to find one is through a referral from a satisfied customer, but you can also start by searching through the National Career Development Association or the International Coach Federation. Liz Ryan, founder of career coaching service AskLizRyan (and a Kiplinger.com columnist), recommends interviewing prospective coaches and asking for examples of how they helped someone in your shoes. Counselors and coaches typically charge about $100 an hour, or they may offer a la carte pricing -- say, $300 for a résumé.

Whether you are a retiree with a few health issues or you have aging parents who need a hand with their health care, a geriatric care manager can help. Care managers assess needs as you (or family members) age, identify resources in your community and create care plans. Start your search with the National Association of Professional Geriatric Care Managers. Using the Find a Care Manager tool, you can narrow the list by credentials -- for example, a certified GCM, licensed clinical social worker or registered nurse -- and areas of practice, such as guidance for adults with disabilities or home care. An initial consultation typically costs $100 to $200 but may be as much as $500. Ongoing care runs $75 to $150 an hour, depending on your location.

From a messy closet to unorganized digital photos to piles of paper, professional organizers can help you put your life in order. Start your search with the National Association of Professional Organizers. Look for a certified professional organizer (CPO) with a Golden Circle designation -- these pros have completed training and exams to get certified, and the Golden Circle means they’ve been in the business for more than five years. Experienced organizers will likely be able to move faster than someone who is new to the business. Hourly rates run from about $50 to $150 an hour. -- Jessica Anderson

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