Family Financial Planning 101

You may feel worlds removed from finances while holding your snuggly baby, yet parenthood is a strong motivation for seeking professional financial advice, regardless of the size of your holdings. Here’s why and how!

Working for a hedge fund manager, Lynn Palmer, 35, of Suffern, NY, is used to having reams of financial research at his fingertips. Yet, about 10 years ago, this father of three kids under three did something unusual among his peers—he sought the advice of a financial planner.

While his relationship with Bob Phillips, of A.G. Edwards, started out as a way for Palmer and his wife to save for retirement, it has morphed into much more.

“Bob and I work as a team to sound ideas off of one another and come up with new ideas,” says Palmer. Asked why he doesn’t manage his own money—given his profession—he says, “It’s very time-consuming to do this on your own. I trade commodities for a living, not stocks … you wouldn’t hire a butcher to make you a cake!”

Do I Really Need a Financial Planner?

Often parents are too intimidated to look at their “big” financial picture, warts and all. That’s why picking the right financial planner to help you put the pieces of the puzzle together and get you on track to meeting your financial goals is a sound decision.

Financial planners can do a thorough analysis to make sure that you and your spouse have enough life insurance to meet your family’s needs, now and in the future. They can give you creative ideas on funding retirement, as well as your child’s higher education. They should offer you a variety of mutual funds and other investment vehicles, and some are able to sell individual stocks. Most planners are also willing to put you in touch with accountants, estate attorneys, and other professionals who can help you with various aspects of your financial life.

How Do You Know It’s the Right Time to Seek Financial Assistance?

“Sooner is better than later,” says Bob Glovsky, JD, CFP, at Mintz Levin Financial Advisors, LLC, in Boston. “When you’re just starting out, it helps to talk to somebody. It’s not that the planner can only do a lot for you when you have some assets. He can look at your benefits at work, making sure that you have enough insurance, making sure that you are maximizing your savings,” Glovsky says.

Joe Swain, a registered investment advisor with Pension Planners Securities in Modesto, California, adds, “It really shows in the long run when people start their savings in their 20s—they are incredibly better off than their peers, and it’s probably 10 percent or less who do this.”

How Do I Find a Financial Planner?

When you start looking for a financial planner, you may be tempted to have a sit-down with the investment advisor at your local bank branch. And while it’s fine to interview that person and get a sense for some of her ideas, keep in mind that one-stop shopping is not always advisable when it comes to your money.

“Independent reps are probably your best bet,” says Swain, because of the variety of products that they can sell. “Most reps are willing to work with young families, especially if you can find someone close to your own age.”

Knowing where to find these independent representatives is crucial. And, as with so many other things in parenthood, you’ll find there’s no substitute for personal recommendations.

Eva Rosenberg, MBA, EA, author of the popular website, Taxmama, says to just ask around when looking for a financial planner. “The best way to find one is to talk to people you know who are happy with their advisors’ results,” she says.

Swain adds, “Ask your folks, ask your boss. Ask an employer or someone who is a mentor to you in your field. These are people who are more likely to have had a long-term relationship with a planner as they have accumulated some assets.”

If you prefer to do your research on the Web, Glovsky suggests checking out some financial planning industry websites. “There are a couple of places to look—the Financial Planning Association and National Association for Personal Financial Advisors.”

Fee or No Fee?

After you get the names of some planners you should interview them, to see whose style best suits you. You should also be aware that planners make their money in one of two ways—by charging you a fee for advice or by getting commissions selling products, such as life insurance or mutual funds. You need to decide which compensation plan makes you more comfortable.

When discussing the option of engaging a commission-based planner, Glovsky says, “The question there is are you getting objective advice? If you are getting objective advice, and you need the products anyway, it can be a cost-effective way of getting advice.”

Taxmama’s Rosenberg says, “All you have to do is make sure the person has the level of integrity that you want. The CFP Code of Ethics says that you have to put the clients’ interest first, and that you have to disclose your compensation.” She adds, “If you’re working with someone who doesn’t charge fees, ask them what they are earning on the investments they sell you. If there are other investment options that will pay them less, but earn you more—you’d definitely want to know about them.”

Always use a licensed professional—the designation of certified financial planner (CFP) or registered investment advisor are the most common—because under their licensure, continuing education and professional ethics are expected, and their licenses can be revoked if certain criteria are not met.

While planning for retirement, many parents find that investments and life insurance loom large over their lives. Additionally, college planning is what frequently drives them to seek professional advice.

Catherine L. Tucker of American Express Financial Advisors in Middletown, Ohio, counsels parents to start saving for a child’s education as soon as they bring the baby home from the hospital. “Think of it as an insurance policy or an investment in your child’s future. You can never make up for the compound interest you lose if you wait to start saving for your child’s education,” she says.

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