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What Financial Expertise Do You Need?

There are many people who run their financial lives solo and do a great job. But for most of us, we don’t have the time to get our knowledge and skills up to the professional level required as our financial, career and personal lives get more complex.

To do these things, and more important, to keep abreast of the latest information out there, we often pay experts to handle our financial planning, tax strategy, and investments. That doesn’t mean we are required to do these things. But let’s start by assessing our skills.

Most people have a team approach to their financial well-being. They’re in the loop, but they work with a professional tax preparer every year (depending on the complexity of their finances, they may need a certified public accountant or a tax attorney), an investment adviser on a quarterly or annual basis, and a financial planner who pulls everything into shape every two or three years, or when a life change review of the overall strategy.

Locating a financial planner

Remember that the best ways to locate a financial planner include the following:

• Speak with friends and colleagues you trust who have obviously been successful working with a planner.
• Check lists of planners with advanced certification such as certified financial planner practitioners. To find CFP in your area, go to
• Make sure you check disciplinary and court records on all planners you consider.

Just remember, planners do not necessarily handle the functions of tax preparers or investment advisers. You need to thoroughly research a planner’s training and areas of expertise.

Locating a tax professional

For the preparation of a simple individual return, you don’t need a pricey CPA. However, you should consider going to a tax preparer if you’ve sold a home in the last year, bought and sold investment assets, started or sold a business, or experienced a divorce or the death of a spouse. If you receive much of your income from sources other than a salary, such as investments, self-employment, or rental income, a tax preparer may help you sort out the complex forms and reduce your tax liability.

To find the preparer that’s right for you, start with your CERTIFIED FINANCIAL PLANNER or practitioner if you use one. More and more planners are doing tax preparation work themselves. The advantage to their clients is that the person preparing their taxes is the same person providing them with tax planning advice and who knows their financial situation.

If your planner doesn’t prepare taxes, however, he or she will likely be able to recommend a CPA, enrolled agent, or other tax-preparation expert. Be sure the preparer is someone available year-round. The planner also may recommend a tax attorney for specialized tax problems when such a need arises. Visit two or three of the referrals and pick the preparer that fits you. Some preparers are conservative in their interpretation of the tax code, while others aggressively seek write-offs that may be questioned by the Internal Revenue Service.

If the services of a tax preparer are appropriate, you can use the preparer most efficiently by keeping good tax records throughout the year. Routinely file all investment transactions, home improvement expenses, tax-deductible donations, previous tax returns, and other records that will affect your tax return. The more orderly and complete your records, the lower your preparation fees and the less likely those errors will occur.

If information is missing, such as what you paid for a particular investment, obtain the information yourself instead of paying the preparer to track it down. Answer all the preparers’ questions as fully as possible.

Finally, remember that not all tax preparers are qualified as tax planners who can provide long-term tax advice. Many financial decisions, from buying a home to getting married, have tax implications, and tax strategies can have important (and sometimes conflicting) consequences on other financial goals. Consult with your financial planner before making any significant financial decisions that may have tax implications.

Locating an investment adviser

If you gathered five people in a room and asked them what the term “investment adviser” meant, you might get five different answers, and there’s a reasonably good chance they’d all be right.

Some people think that an investment adviser is someone who sits around all day and buys stock for their portfolio. Well, depending on how much money and other assets you have, that definition might fit. It might also fit a broker.

Others just want someone to tell them what to buy so they can go out and buy it themselves through an online broker. That can easily be done by a financial planner who can give overall suggestions on types of investments that would work well for a particular person’s investments and goals.

One more might want to get a suggestion on what to buy and for the professional to execute the trade. That professional could be a broker.

Here’s the point. Before hiring someone to handle your investments, you need to take at least ten steps back from that question. Start by figuring out what your goals are, what you have to invest, and how you want to do it. In truth, if you have several thousand dollars or even several hundred thousand dollars, there are people out there to help you. Hut you really need to make sure you need them.

Here are some general questions you should prepare to ask anyone who offers to advise you on investments or to invest your money for you:

1. Are you registered with the Securities and Exchange Commission, your state securities regulator, or NASO (the National Association of Securities Dealers) or some combination of those three? What do those certifications allow you to do?

2. What professional credentials do you have-CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), CFC (Chartered Financial Consultant), or another? This question is all about the initial and continuing education this professional has received.

3. How much experience have you had working with individual investors like me, and what are the average-size portfolios you work with?

4. What kinds of service or recommendations will you offer me, and how will decisions to go ahead with those recommendations be handled? Do I execute trades, or do you?

5. Do you earn commissions or fees on what you buy for me beyond what I’m paying you? In other words, are certain investment firms giving you an incentive to sell me their products over other competitive ones?

6. Can you show me an example of the advice you’ve given another investor similar to me?

7. Can I have references?

8. Have you been sued, censured, or otherwise had complaints filed against you in court or with any other public or private governing body?

9. How do we evaluate the job you’re doing?

10. How often should we meet?

11. How often should you meet with your experts?

Nothing is set in stone on this point, but this is where references help, as does cross-checking one expert’s answers against the other. Obviously, if you have a dramatic lifestyle or legal change, you will need to see your planner to see if you need to reset your goals. Most qualified planners don’t recommend frequent changes, so you may be meeting with them once every two to three years. When you’re working with a tax professional, plan to meet annually with quarterly meetings, required only for major changes in a complex financial picture. Investment advisers can hold your hand as much as you’d like but remember that the meter could be running unless you have another type of compensation agreement in place.

Indeed, compensation is a key point here. Experts never work for free, and you shouldn’t expect them to, if they have talent. Ask polite but pointed questions about what that compensation buys you in terms of advice and its frequency.

No matter what expertise you choose, you’re going to have to acquire a new dedication to researching investments (even if someone is finding them for you) and organizing all your financial data.

What Financial Expertise Do You Need? by