Page 552 - Introduction to Business

526 PART 5 Finance

Traditionally, financial planning advice has been sought from established pro-
fessionals, such as accountants, insurance agents, and stockbrokers. In addition
to these traditional financial advisors, a new category of professionals includes
people who specialize strictly in financial planning. The industry’s largest trade
group, the International Association of Financial Planners (IAFP), recommends
that you have a short meeting with your prospective planner at which time you
discuss the following:
The planner’s background, including education and experience.
The planner’s references, including clients you can call.
The planner’s competence in different kinds of investments, tax-advantaged
vehicles, insurance, and tax strategies. He or she need not be a specialist
in all of these areas, but should be sufficiently familiar with them to
deliver a comprehensive plan.
Who will actually work with you or supervise and coordinate the efforts of
those who will develop your plan.
The degree of individualization you will receive. Are all recommendations
arrived at independently through a detailed study based on research of
your particular situation?
The planner’s method of compensation. Most professionals base their fees
on the complexity of your circumstances and amount of time spent on
your affairs. The three basic methods of compensation for financial plan-
ners are fee only, fee and commission, and commission only.
Certified public accountants (CPAs) constitute one group of traditional financial
advisors who are particularly well suited to financial planning. The most prestigious
professional accounting society is the American Institute of CPAs (AICPA). All mem-
bers of the AICPA must be certified public accountants. CPAs are licensed by each
state only after they pass a rigorous exam and meet a work experience requirement.
The AICPA recommends that its members who have a professional interest in
personal financial planning join the Personal Financial Planning (PFP) division.
Additionally, the AICPA, as part of its Continuing Professional Education division,
provides a Certificate of Educational Achievement Program in Personal Financial
Planning.
Personal Financial Specialist (PFS) A The AICPA offers a specialty designation, Personal Financial Specialist (PFS).
specialty designation awarded by the To qualify, a CPA must meet six requirements, including passing a one-day exami-
American Institute of CPAs to a CPA
after he or she meets designated nation, having a minimum of 250 hours of experience in personal financial planning
requirements in each of the three years immediately preceding the initial application, and provid-
ing six references from other professionals and clients. Exhibit 15.3 lists three promi-
nent financial planning specialist designations and the addresses of the sponsoring
organizations. For more information, you may contact these organizations.
While CPAs and other professionals offer high-quality services, they also are rel-
atively expensive. Depending on the complexity of your financial situation, you
may either obtain financial planning services from experts or do the planning your-
self. Insurance agents and stockbrokers generally offer free financial advice, but you
must be cautious when considering their recommendations. Typically, they receive
commissions on their products. Be sure that their recommendations are based on
your personal goals and not on which products provide the highest commissions.
If you decide to turn to an expert financial planner for help, be prepared to dis-
cuss your personal feelings and concerns without withholding any information. Be
as clear as possible regarding your financial goals. You have the right to clear expla-
nations for any recommendations from your financial planner. Ask questions. Don’t
take any actions without a thorough understanding of the possible consequences.

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.