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Last
January I made a bunch of resolutions about better financial
planning, both for the future and (I hope) the tax man.
If you're a caregiver - or a soon-to-be caregiver - you know
this can be an expensive proposition. A lot of us are still
raising children (or grandchildren). It's hard, or even
impossible, to work, take care of a family, and be a good and
conscientious caregiver all at the same time. Something almost
always eventually has to give, and a lot of times it's something
financial.
We have to take time from work (usually unpaid), or we have to
pay for help. We have more to buy every week. We might be
looking at out-of-home care like assisted living or skilled
nursing. How do we do all this, and still manage to pay for
kids' college or our own later years?
I've heard that elder caregiving can cost up to $650,000 in lost
wages, Social Security benefits, promotions, retirement - on and
on.
Some of us had some savings. After the melt-down of the last
couple of years, we don't have as much as we did - that's for
sure.
So, back to my resolution. I have a good CPA who saves me a
whole lot more in taxes than she costs every year. She can help
me do what needs to be done to keep my taxes as low as possible.
But she doesn't specialize in all the other ways of growing
what's left. For that she refers clients to another specialist -
a financial planner.
"Oh great," I thought. "Another 'professional' I
get to pay fees to. I already have an accountant, an insurance
agent, an attorney and a stockbroker. Now I need another
one?!"
Well, I have to tell you, it was worth the effort. It does cost
some, but like the good CPA - the payoff is higher than the
expense.
When I first started looking, I didn't have the first clue how
to go about this. I have a feeling many of us don't. So, I asked
an actual financial planner to give me some advice on what to
look for, what questions to ask, and where to go.
Here's his reply:
What's The Difference Between a CPA and a Financial Planner?
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by Jim Almond, CFP
Since it's football season, I though I'd try this analogy:
The referees on the sidelines at a game - the ones who're
holding the chains - are like CPAs. They measure and decide just
where the ball is, and what down it is.
This is like the CPA figuring out what your income is, and using
all of the available legal strategies, and the Tax Code, to
figure out what taxes you will owe.
The guys on the sidelines with the headsets (the coaches) are
like Certified Financial Planners. They can see the whole field,
and they're planning the best way to move the ball down the
field.
While reducing taxes through planning is something that many
CFPs may do, taxes aren't their primary focus.
A planner's role is to help a client determine his or her goals,
figure out the best strategies to achieve these goals, and to
monitor the goals and the strategies on an ongoing basis.
How Do You Find A Financial Planner?
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Picking a financial planner is a lot like picking a doctor or an
attorney. You don't want to go to the Yellow Pages. Talking with
a friend who you think has his hands around his financial
issues, or your CPA or your attorney is usually a good starting
place.
CPAs are an excellent source. They have usually worked with
financial advisors with their other clients. They can usually
match a client up with a financial advisor they think will work
well with you.
It's important to note that your CPA and your CFP should be two
different people. It's not mandatory, but with the complexities
of the tax laws and the many thousands of investment options,
it's hard to be really proficient in both areas.
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Make
sure that the planner is a "Certified Financial
Planner". Although this doesn't guarantee success,
this certification shows a high level of training and
competence.
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Interview
the planner and ask for 3 references from each planner
you see.
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Questions
to Ask:
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Do
you provide financial planning and advice to your
clients, or do you primarily focus on "asset
management?"
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How
do you determine your clients "risk tolerance"
- the amount of risk each client would be wise to, or is
willing, to take?
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Does
your firm package its own mutual funds (proprietary
investments) where the advisor may get a better
commission for recommending these funds (rather than
recommending the best funds for the individual client)?
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Has
the advisor ever been charged with ethics violations by
anyone?
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Does
the advisor have a backup in case he's out of down, gets
ill, retires, or dies?
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Will
this advisor be the only one working with you, or will
you be transferred to someone else in the firm?
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What
other services does the firm provide (tax consulting?
legal? eldercare planning?) If the advisor works in all
areas, he may be spread too thin.
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Does
the advisor usually have discretion to make
investment decisions without the client's permission, or
will he always call the client first?
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How
does the advisor communicate with clients (email,
newsletters, phone)? How often?
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A
very important issue is - do you like the advisor as a
person? A friend of mine said, "No matter how technically good an advisor may be, if you don't like
him or her, find someone else." You'll want to be
working with this person for a while, so you should be
able to work together.
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If the
planner hedges, or doesn't want to answer any of these
questions,
you should probably go somewhere else. Your intuition will
usually let you know one way or another.
You
should have a "gut check" between both you and your
spouse to make sure you both feel good about the planner you are
getting ready to hire. A woman's intuition is usually a good
test.
Another good resource you can go to that may provide
more help is
The
Financial Planning Association
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