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How To Hire Financial Help

The 1990s is the do-it-yourself decade. You buy software for your tax planning, use the Web for trades and consult your co-workers on 401(k) investment decisions.

But there is a point at which you should get professional help. Financial planners, accountants and brokers all provide much-needed services, but at a price individuals aren't usually willing to pay.

Managing Your Money
Well, you might want to plunk down some cash for a professional to save your sanity, if nothing else. Too many people become completely overwhelmed and add stress to their lives by trying to do all of their finances themselves, experts said.

Overwhelmed is the key word: If you're burdened by the money you have to manage, including your long-term planning, doing your taxes or deciding where to invest, you should probably pay at least one visit to a financial practitioner, according to personal finance experts.

Financial planners handle money management, long-term investments and strategies for retirement, paying for your kids' college and buying a home.

"People don't think anything of it to go hire a plumber to do a job they could do," said Charles Jaffe, author of The Right Way to Hire Financial Help.

"Hiring a financial planner is no different."

Inexperienced, older investors in particular should look into hiring a financial planner because they don't have a lot of time to waste, especially if they already bombed some investments, Jaffe advised.

Few financial planners charge hourly, instead opting for a percentage of assets under management. You're getting a fair deal if your financial planner is taking about 1 percent of your assets, Jaffe said.

But, because financial planners would collect their percentage no matter what, Jaffe warns they might have little incentive to watch after your interests. Then they might make a move with your investments because they feel obligated to justify their services, which isn't always the best for you, he said.

Some financial planners charge one-time fees for handling comprehensive or simpler plans. The College for Financial Planning in Denver surveyed 3,000 of its graduates and found the average financial planner charged $700 for a comprehensive plan and $300 for an abbreviated plan. But those charges could be higher in certain urban areas and lower in smaller towns.

If you just want a checkup, ask a financial planner not to charge the first visit. And if you're simply hiring a planner to help you pick a mutual-fund portfolio, Jaffe said you shouldn't spend more than $19 - or what it costs for software.

Anyone starting a small business should definitely hire an accountant said Kay Jeffers, president of the National Society of Accountants. Most banks want a financial plan and an accountant can guide a new small-business owner through that, she said.

Individuals handling their own income taxes should pay an accountant if they have more write-offs than some dividend income interests and child-care credits, Jeffers advised. "The tax laws can be very confusing today, and people lose deductions because they don't understand the laws and don't know what to look for," she said.

Jeffers also said Americans spend 75 hours to 100 hours each year on their taxes. "Most people today don't have that kind of time," she said.

But the most crucial part of hiring an accountant is the relationship you have with the person. Jeffers recommended interviewing at least two accountants, finding out what their credentials are, what tax background they have and what their client base is. Then, she said, they should call clients.

And having "certified public accountant" imprinted on their business card doesn't mean they're the best, Jeffers said. They can be accredited in accountancy and taxation and be licensed by the government, but the most important element is that they continue their professional education. Ditto for financial planners, Jaffe advised.

A popular alternative to brokers is online trading, but handling your own trades isn't a good idea, said Paul Young, founder of the Marina Del Rey, Calif.-based Securities Arbitration Group. Young, who fights against fraudulent brokerage houses and brokers, said, "Most people are not expert financial people."

Young recommended using a broker but negotiating fees in your securities account - even if you don't have too much money with the broker. But make sure you negotiate the lower fees instead of being sold on no-commission or low-commission trading from a broker, he said.

"In the real world, many, many, many, many people have been victimized by brokers and they were kind of led down the path of low or no commission," he said. "I think price is the last [important] thing on the list. I don't care much about that."

Instead, Young gave seven tips for checking out a broker. Many work for hiring other financial planners as well.

  • Ask friends and business associates for references.
  • Interview a number of different brokers.
  • Study the firm and broker's backgrounds and find out if any complaints were filed against them.
  • Interview the firm's branch manager.
  • Get names and numbers of 12 current clients the broker handles.
  • Find out the broker's product knowledge and whether he wants to sell you certain stocks or industries.
  • Ask how much the broker will make in commissions.

When and if you hire a broker, make sure to call every two weeks to keep in touch and stop by once every two months, Young advised. Also, make sure to evaluate each statement critically, and don't gant your broker discretionary authority to trade on your account without contacting you first.

Written By Tiare Rath