Financial Planners: Are they right for you?

Joseph Smith, founder of JAS Financial Services LLC., is a Certified Public Accountant and a member of the National Association of Personal Financial Advisors. Source: JAS Financial Services LLC.,

Ever considered hiring a financial planner for your personal investments?
Financial planners are investment experts who can help you meet your long-term financial goals by helping you manage your nest-egg. But you may be wondering, why spend that money when you’re trying to save every penny possible? Who exactly are these financial planners, and what can they do for you? Can they be trusted? These are some of the most commonly asked questions, and Joseph Smith, the founder of JAS Financial Services LLC., based in Evanston, provided some answers.

1. Which type of investors benefit the most from using a financial planner?
Well, actually, most investors can benefit from financial planners but it really is broader than that, because it’s not just the investors. A lot of people don’t think of themselves as investors — sometimes when I deal with people, they say, “well, I don’t have any assets,” but they have an IRA [Individual Retirement Account] or they have a retirement plan, or more importantly, in some cases, some people don’t have any assets or investments – and that’s the problem. So I think everyone, whether they have nothing and are building it up, or they have everything and are trying to maximize the benefits for themselves, they can all benefit from financial planning. I view financial planning as a broad and encompassing step. It’s more than just investments.

2. What are some advantages of using a financial planner during challenging economic times?
The advantages are, one, financial planners can help people to recognize where they are financially, and two, present them with some alternatives or courses of action that could help them, and finally, help them take advantage of what’s out there to in order to achieve their goals or protect themselves from future losses.
Some people think they are in better shape than they really are; some have taken risks that they weren’t aware of; some are behind the eight ball; and some really aren’t going to recover. But at least knowing where they are in the short-term helps them to make important adjustments.

3. How often can a client expect to communicate with his/her planner, and how much input does the client have in making decisions?
The frequency of the communication depends on the nature of the engagement. If I’m working with a client that’s on an hourly basis, it’s strictly up to them. If it’s on a fixed-fee basis, clients find it more comfortable calling for advice and they are more receptive to my calls because they aren’t worried about the ticking clock. To me, the most important thing is the client and the client’s perception – what they want to achieve. There is an expanding research regarding investor behavior. Part of the planner’s job is to help the clients understand whether what they want to do is reasonable or not. Sometimes you can’t prevent somebody from making a decision that you think isn’t the right decision. But if you point out why it’s not, and you’re working with a client over a long period of a time, you have the opportunity to point out where they could modify their behavior in the future. It’s an on-going relationship and you have the opportunity to help educate the clients so that they can start to see why they should consider various alternatives.

4. How much would you say is a reasonable price range for hiring or retaining a financial planner?
Again, it depends on what the nature of the services provided are and what is going to be involved. A lot of the clients I have don’t want to pay for a full financial planning from the beginning but they pick a segment, and when we complete that segment, we move into other areas over periods of time, gradually into a full comprehensive plan, which I encourage. Sometimes the full plan is too much for people to adapt to at one time. But I’ve seen price ranges from approximately $650 to $5000 or $6000.

5. What is a reasonable return for a client to expect and how are results typically measured?
There is no one standard that you can use because if you are dealing with somebody who is very risk-averse, you are not going to be able to put together a portfolio that they are comfortable with and get the same results as somebody who’s willing to take more risks. So what we try to do is to create a benchmark based on what we think is appropriate for that client, and we measure future performance against that benchmark. So for example, if there are two similar portfolios with 60 percent stocks and 40 percent bonds, but one portfolio has riskier bonds and a more diverse portfolio with foreign stocks and small cap [stocks], that portfolio will have a higher rate of expected return even though the two portfolios have the same composition of bonds and stocks.

6. What advice do you have for finding the right planner that suits your needs and investing style?
You can look up what their education and their experiences are, and that’s important. But you have to be able to form a relationship with the planner and that’s built on a few parameters. For example, I am one of about 2,000 members of the National Association of Personal Financial Advisors. This group of people believe very strongly in fee-only, we try to avoid any conflicts from commissions and selling products, and we all believe in comprehensive planning. Even if we are not making a comprehensive plan, we are always trying to think how one thing affects another.
You can also get an idea by talking to them. Some of the questions I have been asked are: What do you read? How much time do you spend reading? How much time do you spend studying? Everybody looks for something different but you are trying to look for someone who has proven themselves over a period of time, and has the right type of experience and education to think things through and come up with alternatives. And that’s why many financial planners make available their backgrounds and professional organizations.

Joseph Smith is a Certified Public Accountant and a member of the National Association of Personal Financial Advisors. He also has a law degree.

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