Q&A: You need a planner for personalized advice

Dear Liz: I have five questions. I have enclosed five sheets of paper with each question printed at the top. Please feel free to simply write your advice on each page, and then insert them into the addressed and stamped envelope I have enclosed. This is my attempt to make it easy for you to respond.

Answer: Thank you, but it’s not the lack of paper or a stamp that prevents columnists from replying to private inquiries. Questions of general interest may be answered here, but you’ll need to seek out a financial advisor for personalized advice.

You have many options for finding fiduciary, fee-only advisors. Fee-only advisors accept fees only from clients rather than accepting commissions or other compensation based on products the advisors recommend. Fiduciaries are advisors who promise to put clients’ best interests first. The following organizations can connect you to fee-only advisors who are fiduciaries:

—The National Assn. of Personal Financial Advisors. NAPFA advisors must be certified financial planners (CFPs). Many NAPFA planners charge a percentage of the assets they manage (called an “assets under management” or AUM fee) and have minimum asset requirements, although some charge hourly or retainer fees. A typical fee is around 1% of assets under management.

—XY Planning Network. Advisors must be CFPs and offer the option of flat monthly fees, although they may offer other arrangements including hourly or AUM fees. Monthly fees are typically $100 to $200, with some planners charging an initial fee of $1,000 to $2,000.

—The Garrett Planning Network. Planners must be CFPs or on track to get the designation, or CPAs who have the personal financial specialist (PFS) credential. Hourly fees usually range from $150 to $300.

—Assn. for Financial Counseling and Planning Education. This group offers two credentials for advisors: accredited financial counselor (AFC) and financial fitness coach (FFC). Both focus on helping middle- and lower-income people get a handle on the basics, including budgeting, debt management and retirement planning. Counselors work with clients in financial crisis or who need help with spending plans, eliminating debt, building savings and improving financial stability, said Rebecca Wiggins, the association’s executive director. Coaches focus more on helping clients understand how effective money management can help them achieve life goals, with a focus on changing financial behavior using goal setting, accountability and monitoring, Wiggins says. Many counselors and coaches work for the military, credit unions or other organizations and offer their services free or at reduced cost. Coaches and counselors who have private practices typically charge $100 to $150, but many work on a sliding scale.

Q&A: Where to find financial planner fiduciary oath

Dear Liz: You often mention that a financial planner should be “willing to sign a fiduciary oath to put your interests first.” Is there a form or formatted letter available to financial planners who are willing to sign said oath?

Answer: There is. The Committee for the Fiduciary Standard, a group that promotes the idea that advisors should put their clients’ best interests first, has just such a form letter at www.thefiduciarystandard.org/fiduciary-oath.

Q&A: To help elderly dad hold off mooching adult kids, call in the experts

Dear Liz: My dad, age 90, needs personal care and I am trying to get him to move out of his house to a senior residential place. He is in agreement, but it is taking a long time to make this happen. He owns his home free and clear and, along with the sale of his home, has enough financial assets to cover these costs.

The problem is my two sisters’ husbands, who overspend and are in debt. These two guys continue to pressure my sisters to ask my dad for money for such things as their mortgages, expenses for their children and credit card debt. My sisters are not just starting out — they are in their 50s! Not only that, when I ask them for help with our dad, they flake out on me. I’ve told them that the financial assistance can’t continue because Dad will need his money to pay for his care.

I feel that my sisters’ and their husbands’ behavior is senior financial abuse. I read that this situation happens a lot in families, where the kids will milk an elderly, wealthy, sympathetic parent or grandparent, sometimes draining their savings. Or one dysfunctional sibling with take financial advantage of a parent, while other siblings in the family struggle with making ends meet. In our family, both my sisters have children, so my dad feels a soft spot for helping them out. I am single, no children, and I am treated differently. I do struggle to make ends meet. My dad is sometimes even reluctant to reimburse me $20 for gas that I spend driving him around and doing shopping and errands.

I’m trying to remain on good terms with my sisters but it is getting tough. Is there any financial advice or references you can give in my situation?

Answer: You’re right that most financial abuse of the elderly is committed by people close to the person, typically family, friends or caregivers. The toll isn’t small, either. A survey by Allianz Life Insurance Company found that the average victim lost $30,000 and 1 in 10 lost more than $100,000.

Family members may not see what they’re doing as abuse. They may think that they “deserve” the money or that it’s some kind of advance on a future inheritance. They also know that Dad just can’t say no and will continue to press him for money as long as they’re allowed to do so.

You and your dad should consult an elder law attorney to discuss ways your dad can be protected against predators. You can get referrals from the National Assn. of Elder Law Attorneys at naela.org, and the attorney can discuss your options.

One obvious solution would be for Dad to hand over his checkbook to you, which would give you the unpleasant job of standing up to your brothers-in-law. You’re certainly in a better position to do so than your elderly father, but he may not be willing to give up control or you may not want the job.

Another option is hiring third parties. Daily money managers provide personal finance and bookkeeping services to elderly clients. They can keep a watchful eye on transactions and spot signs of fraud. You can get referrals from the the American Assn. of Daily Money Managers at aadmm.com. Hiring a geriatric care manager also could be a good move. The manager could assess your father’s health, living and financial situations and help craft a plan to help him move forward. Referrals are available from the Aging Life Care Assn. at aginglifecare.org.

Q&A: Money in the bank isn’t safe from inflation

Dear Liz: I am 68 and not in very good health due to heart disease. I’m not sure what do with my savings of over $1 million, which sits in online bank accounts, earning 1.25% to 1.35% in 18-month certificates of deposit. (No account contains more than $250,000 to remain under the FDIC insurance limits.) The money will eventually go to my daughter, though I could use it for my retirement. I don’t have the appetite for market swings. What should I do with my money?

Answer: Your money currently is safe from just about everything except inflation. If you want to keep your nest egg away from market swings, you’ll have to accept that its buying power will shrink. There is no investment that can keep your principal safe while still offering inflation-beating growth.

If you do want a shot at some growth, you could keep most of your savings in cash but also invest a portion in stocks — preferably using low-cost index mutual funds or ultra-low-cost exchange-traded funds.

Before you know how to invest, though, you’ll need to think about your goals for this money. A fee-only financial planner could help you discuss the possibilities and come up with a plan. You can find fee-only planners who charge by the hour through the Garrett Planning Network, www.garrettplanningnetwork.com.

Q&A: How to make sure your financial planner is looking out for you

Dear Liz: As a recent retiree, I opened an IRA with a well-reputed, independent financial planner. I was assured of our fiduciary relationship and told “besides, it will soon be law” that advisors will have to put their clients’ interests first when offering advice about retirement funds.

I guess that whole “soon to be law” thing is out the window along with many other consumer protection regulations. My question is, should I ask my advisor to reaffirm our relationship formally and if so, is there a mechanism available to me to assure this relationship?

Answer: Technically, the U.S. Department of Labor fiduciary rule for advisors is still scheduled to begin taking effect in April, despite fierce opposition from the financial services industry. The Trump administration, however, has asked for a review to see if the rule should be modified or scrapped. That has been widely taken as a signal that the rule may never be enforced, even if it does go into effect.

So yes, retirement savers should continue to be skeptical. One way to make sure that your advisor is ready to put your interests first is to ask him or her to sign the fiduciary oath that you can find at www.thefiduciarystandard.org. The oath was created by a group of financial advisors who think that advice should always be in the clients’ best interests.

Q&A: How to tell if you’ve got the right financial advisor

Dear Liz: I have met with a financial advisor, but he wants every investment to go through him. Although he is an advisor, he works for a company and wants me to buy their products. I’m a little resistant about this. What’s your advice?

Answer: Anyone can call himself or herself a financial advisor or a financial planner. There are no education, experience or ethics requirements for using those titles. A more accurate job description for this guy might be “product salesman.” He may not charge you upfront, but he’ll make commissions from those products and will recommend them even if there are better, cheaper options available.

If you want someone who puts your interests first, look for a fee-only advisor who’s willing to act as a fiduciary. “Fiduciary” means the advisor promises to act in your best interests. And don’t confuse “fee only” with “fee based.” Fee-only advisors are compensated only by their clients. Fee-based advisors may charge their clients while accepting commissions for the products they recommend. You can get referrals to fee-only advisors from the Garrett Planning Network at www.garrettplanningnetwork.com and the National Assn. for Personal Financial Advisors at www.napfa.org.

If you want someone to give you comprehensive financial planning advice, make sure that he or she has the appropriate credential such as Certified Financial Planner (CFP) or Personal Financial Specialist (PFS) and that you verify the credential with the group that issued it (the CFP Board of Standards for the CFP, and the American Institute of Certified Public Accountants for the PFS).

If all you want is help with investment management, though, you may not even need an advisor right now. “Robo advisors” offer automated portfolio management using computer algorithms. Robo-advising began with start-ups like Betterment and Wealthfront and it’s now offered by more established companies, including Charles Schwab and Vanguard.

Q&A: Paying an advisor vs. doing it yourself

Dear Liz: I started with a fee-only advisor 10 years ago. She moved to another company a few years after and I followed. She’s really done well for me. My question is, now that I’m getting ready to retire, should I manage my own accounts to avoid incurring commissions or fees? I don’t anticipate making any major changes to my portfolio.

Answer: If your advisor is truly fee-only, then you aren’t paying commissions on your investments. You’re paying fees to her plus fees for the various investments you own.

You can’t avoid fees. While you’re smart to want to avoid paying too much, you also need to consider the value you’re getting. Is your advisor a comprehensive financial planner who can answer your questions on most aspects of your finances, from budgeting to estate planning? Has she helped you stick to your investment plan in good times and bad? Can she serve as a watchdog as you age, monitoring you and your accounts for signs you’re at risk for fraud or bad decisions?

If you’re not getting your money’s worth, then you have two options: looking for a cheaper deal or an advisor who will give you more service.

For example, if your advisor is just providing investment management and you’re paying more than about 1% of your portfolio for her services, then you might well consider doing it yourself or turning to one of the many automated investing services that charge one-quarter to one-half a percentage point. Alternatively, you could look for an advisor who can be a comprehensive planner for the same fee, or less, than you’re paying now.

Q&A: What to do when a financial planner gives bad advice

Dear Liz: I personally like my fee-only financial advisor, who has been managing my portfolio (gained as inheritance) for the last six years. But she has me invested in bonds and gold only and insists that we wait until stock prices fall to get back in the stock market. We have been waiting for six years! My portfolio was not making much but now is declining with projections of interest rates increasing and the new administration’s potential financial implications. My current balance is only half of what it could’ve been had I stayed in my previous portfolio, set up by my previous advisor, of 60% stocks and 40% bonds. Is it time to change advisors again, or should I continue to trust my advisor’s advice? I’m one to five years away from retirement.

Answer: Your advisor is trying to time the market, despite ample evidence that market timing doesn’t work. You’ve missed out on a lot of growth, and your portfolio could take an outsized hit because bond prices suffer when interest rates rise. Big investments in gold are also problematic, given how volatile the prices of this commodity can be.

Increasing your stock exposure now comes with its own risks, of course, since the long-running bull market could end at any time. Still, you almost certainly will need the inflation-beating growth that only stocks can offer if you want a comfortable retirement. If your advisor isn’t willing to admit that she blew it, then you may want to start interviewing her replacement.

Q&A: Where to find help with managing your finances

Dear Liz: I am a mid-30s single woman who needs accountability in managing my finances and paying down debt. I have about $7,000 in credit card debt and $9,000 in student loans and I earn $55,000 a year. I feel as though I may have the financial means to do this but require a knowledgeable, structured approach. I’d like to work with someone to set up a plan and help me stay on track with it. I’ve considered trying LearnVest as well as smaller privately owned financial planning companies and a financial coach. Do you have any recommendations for finding assistance that could best suit my needs? Does what I’m looking for even exist?

Answer: It’s not always easy to find a fee-only financial planner who will help with budgeting and debt repayment. Many advisors cater to high net worth individuals who typically don’t have the same cash-flow issues as middle Americans.

The Garrett Planning Network offers referrals to fee-only planners who charge by the hour at www.garrettplanningnetwork.com. These advisors have the certified financial planner credential and, unlike many other fee-only planners, don’t have minimum asset requirements for new clients. You can interview a few prospects by phone to get an idea of the cost, but expect to spend at least a few hundred dollars to get started and then hourly fees for ongoing help.

If you’re OK not meeting with your advisor in person, LearnVest offers email access to a dedicated advisor who is either a certified financial planner or a registered investment advisor representative. For a $299 setup fee and a $19 monthly fee, you’ll get a customized financial plan as well as step-by-step instructions for implementing it.

Another option to consider is a nonprofit credit counselor. These agencies offer debt management plans for those who struggle to pay their credit card bills, but many also offer budgeting classes and financial coaching. You can get referrals from the National Foundation for Credit Counseling at www.nfcc.org. Your initial meeting with a counselor will be free. If you opt for a debt repayment program, the enrollment cost is capped at $75 and the monthly fee at $50, although many agencies charge less.

Q&A: CPA vs. financial planner

Dear Liz: I read your recent response to the lottery winner. You made some really good comments and suggestions. However, you suggested that the person seek out a trustworthy, fee-only financial planner.

I am a certified public accountant. As you know, CPAs have historically been one of if not the most trusted advisors. I do get defensive when I read articles such as yours because never do people suggest that a CPA be consulted in situations such as these. In my opinion, financial planners do not have the overall breadth of experience and knowledge of the income tax and estate tax ramifications of decisions that need to be made.

Answer: If you’re holding yourself out as an expert in financial planning, you’d better be one.

There’s no question that CPAs are tax experts. But how knowledgeable are you about investments? Insurance, including life, health, disability and long-term care? Retirement savings and income planning? Education planning and funding? Social Security, Medicare and Medicaid? Employee benefits, retirement plan selection and business succession planning?

Those are only a few of the dozens of topics that a certified financial planner is required to know. CFPs are expected to look at clients’ entire financial picture and understand how the pieces should best work together. They are supposed to know that taxes may be a factor in many financial planning decisions, but taxes shouldn’t be the only or even the driving factor in any of them.

CFPs may not be able to match your breadth or depth of knowledge in your area, but that’s why they would refer clients to certified public accountants for detailed help with those issues. They also would know when to get estate-planning attorneys involved, and insurance agents and so on.

Some CPAs do become comprehensive financial planners by earning the personal financial specialist or PFS credential, which is similar to the CFP. The additional training and experience helps them understand how taxes fit into their clients’ larger financial picture. It also helps them know what they don’t know, so they know when to consult more knowledgeable experts for help.