Finding a Real Cowboy

iUniverse, Inc.

Contents

Foreword.......................................................................ixAcknowledgments................................................................xiWhy Are We Doing Business This Way?............................................1Why Hiring a Financial Planner is Not Just for the Wealthy.....................8Exactly What Is a Financial Planner?...........................................16Finding a Real Cowboy..........................................................20The Fiduciary: As Good as Gold.................................................28Alphabet Soup: What Do Those Letters Really Mean?..............................39The Interview Revisited........................................................49Hire an Individual, Not a Firm.................................................55Avoiding Train Wrecks and Howling Coyotes......................................58The Roundup: Putting It All Together...........................................75Resources......................................................................79Appendix A: Financial Planner Search Matrix....................................81Appendix B: Certifications and Charters........................................84Appendix C: Designations.......................................................90Appendix D: Verification.......................................................98

Chapter One

It's not unusual for people to think financial planners are only for the wealthy, but that view is a bit lopsided. The events of 2008 and 2009 have certainly shown us how fallout from the irresponsible behavior of banks and investment firms-even those with whom we've never done business-can affect all of us, regardless of wealth.

It's tempting, and perhaps even a bit comforting, to write off such debacles as short-term hiccups, believing that eventually things will go back to normal. But when it comes to making decisions about your finances, "normal" doesn't really exist anymore. Why? Economic crises aside, think about how profoundly the overall financial landscape of our lives is changing.

Times of Change

Thirty, or even twenty, years ago, most folks could get along pretty well on their own if they just balanced the checkbook every month, minded their savings, paid the mortgage, and kept up with a company retirement plan.

That's not how things work anymore.

Even before 2007, a major shift in personal finance was underway that continues to touch nearly every household in the country: the increasing disappearance of company pension plans and the advent of 401(k)s, which employers contribute less to, mean individuals will continue to become more and more responsible for their own retirement savings. With this need for increased savings comes the responsibility for making prudent decisions regarding not only investments, but also spending and budgeting-and these are decisions that need to be made throughout your life. They can't be put off until retirement nears.

On top of that, no one knows what the future of health insurance will look like, and how much responsibility each of us will have to take for finding and paying for our own coverage. Another profound change is the rapidly evolving nature of work itself. Loyalty doesn't count for much anymore, and not many companies hand out a lot of twenty-year pins these days. Very few of us will spend our entire working lives with the same company, or even in the same type of job. Many of us will go through periods of unemployment. All of this means that traditional approaches to financial security-those established, say, fifteen, even ten years ago-may not work anymore, or at least not as well as before. It means individuals today should plan for less job security and more job change during their lives, which will make personal financial planning harder, requiring different approaches to such things as how much money to sock away for an emergency or how much debt to take on.

In addition, as bachelor's degrees become a dime a dozen, formal education is likely to become a crucial part of the modern career-person's life. So you have to prepare emotionally and financially for periods when you'll need to stop working to receive additional education and training.

Another change: while it's good news that we can all expect to live longer than previous generations, increasing life expectancies also have significant financial implications. When Social Security was established in 1935, the average life expectancy was around sixty-five years. Now it's eighty-four for men and eighty-seven for women. (And note that these are the average ages, meaning a good number of people live longer.)

These changing times, however, are not times to put your head in the sand. Instead, you must get rational about the future. Yet, remarkably, many devote less time to mapping out a financial course than to shopping for the best bargain on a flat-screen television. To boot, they base their 401(k) investment choices on advice from friends and relatives.

Don't get me wrong. I have friends. I have relatives. I have a flat-screen television. They're all useful in their own way-even the relatives! But counting on any of them for sound financial advice is often utter lunacy.

The Planner's Purpose

You now see that financial planning is not just for the wealthy or those on the cusp of retirement. Everyone can benefit. But will hiring a financial adviser make you rich? I suppose anything's possible. But if an adviser promises you that, call the police. What a planner should be able to guarantee is to help you (1) take control of your finances, (2) map out a long-term plan based in your real world, and (3) become significantly less vulnerable to the whims and schemes of the financial services industry.

Managing, and hopefully accumulating, wealth is part of the idea, of course, but solid financial planning is about things more fundamental. Personal finance can become complicated. What seems like a simple question-How can I buy a house?-can quickly turn into a Rubik's Cube of frustration as you grapple with the interlocking parts of your finances. New questions start to sprout like weeds. Can I save enough? How much is enough? What will I cut back on? Can I make enough progress? A good financial planner can help get you on the track to answering such questions, helping you integrate financial planning into your daily life so that you can see how to reach your goals and objectives. Like gaining security for your spouse and children, money for college educations, the ability to stay in the home you love, or just time-time to travel, visit a dude ranch, paint, foster rescue animals, garden, write a book, hang glide, or whatever else your heart commands.

Another less tangible, but equally important role of financial planners is helping to ensure that the way you live, how you spend your money and time, is a reflection of your values-in other words, that it embodies what is important to you. To do this, however, a planner must really listen to you, and work with you. You will need an adviser who has the experience, training, and knowledge to help you, brainstorm with you, and clearly explain the viable options that will enable you...