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INVESTING
Finding the Right Pro
(Page 2 of 3)
by Anne Kates Smith

There are two professional associations. The National Association of Personal Financial Advisors (www.napfa.org) is a registry of fee-for-service financial planners. The Financial Planning Association (www.fpanet.org) is the largest planning association, with 29,000 members. The Garrett Planning Network (www.garrettplanningnetwork.com) is a nationwide network of advisers for the budget-minded.

The cost of advice

Vetting potential advisers is paramount, starting with how you'll pay the tab. You may be most comfortable with an adviser who charges a fee rather than someone who sells commission-generating products. Some fee-based advisers are paid by the hour or by the job; others charge an annual retainer or a percentage of the assets they manage. You shouldn't automatically rule out an adviser who works on commission, but that kind of compensation poses potential conflicts of interest. An unscrupulous adviser might be tempted to trade a lot in order to earn the commission, or sell in-house products when others might be cheaper or more appropriate. Advisers should disclose those conflicts and provide a persuasive explanation of why you might need a particular commission-generating product.

Consider, for instance, the way Shari Miller does business. The La Jolla, Cal., financial adviser charges a combination of fees and commissions. Miller and her partner, Michael Dorvillier, both of whom are licensed by the National Association of Securities Dealers, might have been called stockbrokers in years past. Miller has worked for 12 years with LPL Financial Services, an independent brokerage firm with more than 5,500 reps nationwide. Because LPL doesn't have its own product line, Miller and Dorvillier are free to suggest any securities or mutual funds they choose.

Whatever the recommendation, says Miller, "I make sure clients understand what they're buying and how much they're paying." Clients pay 0.75% to 2% of assets for ongoing market advice and investment recommendations, or commissions of 1% to 2% for stock and bond trades and up to 3.5% when purchasing funds. Though do-it-yourselfers can definitely invest more cheaply using no-load funds and discount brokers, LPL's prices fall within the range charged by financial professionals and full-service brokers who are paid for their advice.

There's an adviser to fit every pocketbook. The Edwardses' adviser, Kristine McKinley, of Beacon Financial Advisors, in Lee's Summit, Mo., is one of a new breed of planners who offers affordable advice to the less-than-affluent. Many planners require a minimum net worth and charge $3,000 to $5,000 for an initial plan, plus up to $300 an hour for consultation. McKinley, who is a CFP as well as a certified public accountant, will counsel anyone for $150 an hour. So far, the Edwardses have paid less than $1,000 for three consultations, addressing such questions as which funds to pick in their employers' retirement plans and how to budget for the arrival of children.

Jane Bertsch, 59, signed on with Detroit-based Cambridge Advisors in 1999. For $5,000, she received an initial review, which included an evaluation of her investments, assistance in drawing up a will and tax planning. Three years later, Bertsch lost her patient-relations job with a group of hospitals. But her $2,000 annual retainer entitled her to advice from lawyer and MBA Bert Whitehead, Cambridge's founder, and his staff, who weighed in on whether Bertsch should take her pension early or wait, how she should pay income taxes based on her newly self-employed status and how she might restructure her $250,000 fund portfolio. Meetings are scheduled quarterly, but, says Bertsch, "if I were to decide to buy a new car, I'd call and ask whether I should buy or lease. They're always available."

In fact, advisers who share Whitehead's philosophy are available in more than 25 states through the Alliance of Cambridge Advisors, a network of about 150 planners. Clients can choose, like Bertsch, to pay an annual retainer for ongoing advice, or pay a one-time fee ranging from about $500 to $900 for a financial "tune-up" to address just two or three issues.

At the other end of the advising spectrum are "wealth advisers," such as Joe Montgomery, head of the Optimal Service Group, in Williamsburg, Va., a unit of Wachovia Securities. A CFP, Montgomery has been advising Rathert, the retired executive, since Gerald Ford was in the White House. One of the biggest challenges has been maximizing the value of Rathert's Anheuser-Busch options without risking everything on a single company's stock. Montgomery hedged the portfolio with complex strategies using the options. Today, Rathert says, his account is worth more than $5 million and "diversified six ways to Sunday."

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