Advice for Friends Interested in Financial Planning?

[GoodSense]

Since I occasionally talk about financial planning, my close friends generally know that I am interested in it. Recently a couple of them have told me that they are looking for a financial planner to help them manage their money and save for retirement. My first reaction is, "I don't know if that's a great idea," but then again I've never used one, only heard negative stories. I'm sure there are good ones out there.

I have offered the following "standard" advice:

1. LBYM and eliminate credit card debt
2. Invest in low-cost index funds
3. Read books on investment (Bogle, "4 pillars," "A random walk")
4. If they must, use a fee-only planner

But I wonder if there's anything else that would be helpful. These friends are generally smart, fiscally responsible adults with good credit and long-term view. I feel that they have great potential for ER if they work at it.

Also, is there a rating system for financial planners? How can anyone find good fee-only planners? Is it just by word of mouth? (But again, people may not know if they got sloppy financial advice...)

I'm sure there's another thread somewhere about it, but can't seem to locate it. Thanks.

 

[JustCurious]

Home Page - NAPFA - The National Association of Personal Financial Advisors

 

[Sarah in SC]

I second that NAPFA link. Also check out CPAs in your area that have the PFS designation (personal financial specialist)--those are usually quite conservative and can be good for folks that primarily just need a "check-up" to their plan. It all goes back to how they get paid and if they have fiduciary responsibility to you.

 

[Rich_by_the_Bay]

I have offered the following "standard" advice:

1. LBYM and eliminate credit card debt
2. Invest in low-cost index funds
3. Read books on investment (Bogle, "4 pillars," "A random walk")
4. If they must, use a fee-only planner

But I wonder if there's anything else that would be helpful. These friends are generally smart, fiscally responsible adults with good credit and long-term view. I feel that they have great potential for ER if they work at it.

Your advice is safe and sound. In my experience, it just seems to turn out best when I refrain from any kind of advice in this arena. I think that some people seem to think it's rude or crass to talk about money in almost any context.

I make exceptions if someone seems concretely interested in specific topics, rather than in their own financial plans. I dislike that it is "off limits" all the time, and that's one of the attractions of a forum like this, but similar to politics and religion, go there with care.

 

[freebird5825]

went thru financial planning in 2002 with a CFP (fee based, no sales). had a written contract up front on exactly what would be done and how much it would cost. covered the whole enchilada - investing, retirement, estate, wills, short-term, long term, what-if scenarios, yadda yadda yadda.

best $ i ever spent.

at the risk of sounding grim, life threw me a terrible curve in late 2004 when i lost DH to aneurism. i have called those CFP folks several times to say thank you for their advice and good steering.

 

[GoodSense]

Thanks. Very helpful advice and link -- didn't know about the organization before. Maybe I'll check out a FA myself someday.

 

[LOL!]

Even with NAPFA it is miss or miss in my experience. At least for me it's one for one bad. See also
What “Financial Adviser” Means 95 Percent of the Time - Registered Investment Advisor
and if you haven't already this other thread: http://www.early-retirement.org/forums/f28/fa-great-paper-poor-execution-33642.html

Basically, you need to learn enough to know that one is not rippiing you off, and if you know enough to know that, then I don't think you need a financial planner except in rare circumstances.

 

[jimnjana]

I think the American Association of Individual Investors is a good source of basic unbiased investment information AAII: Unbiased Stock Investing & Personal Finance Education from a Nonprofit Source their journal is available at many libraries.

Also www.360financialliteracy.org has good unbiased information as well.

Jim