Susan Cohen and Barry Berg, of Maplewood, N.J., handled their own finances for years. But when their special-needs son, Julian, turned 18 in 2013, they had a docket of financial decisions to make for the young man, born with Fragile X syndrome. They reached beyond their circle of advisers, which included a lawyer, accountant and stockbroker.
Two steps into the world of personal finance, though, and the couple was knee-deep in acronyms, deciphering the dozens of letter combinations behind advisers’ names. No wonder so many consumers say the result is TMI (too much information).
Cohen was lucky, she said, because she found a Lincolnshire, Ill.-based advocacy company, Protected Tomorrows Inc., that rallied a team. Its CFP (certified financial planner), Mary Anne Ehlert, helped them build a financial plan and point them to people who know their stuff, including a CLU (certified life underwriter) to draft a “second-to-die” life insurance policy that will kick in if Julian outlives his parents, and a CPA (certified public accountant) to file tax returns for Julian’s special-needs trust. The organization also linked them to an attorney who knows special-needs law and social workers who navigate Social Security.
Whether you need a team as large as Cohen’s, your first order of business is to determine your financial needs. As you shop professionals, “Understand that many generic terms like ‘wealth manager’ and ‘investment counselor’ don’t mean much,” said Michael Branham, an Edina, Minn., CFP and chairman of the Financial Planning Association. It is the letters after their names that tell you if outside organizations have given them stamps of approval.
“You can’t just hang up a shingle and say you’re a ‘CFP,’ for example,” Branham said. “You have to have been in the field first, have continuing education, abide by a code of ethics and pass the right examinations.”
A CFP is a good starting point, Branham said, because he or she “looks at your total financial picture and goals and helps you put together a plan.”
Ideally, you meet with your planner when you begin your career, Branham said. “Then, your plan is in place when life happens, like marriage, divorce, disability, death of a spouse or birth of a child,” he said.
If your adviser is a “fee-only planner,” he charges you a fee instead of taking commissions for products. It could be a flat fee or a percentage of your assets, explained Ken Eaton, an Overland Park, Kan., CFP, but the fee-only adviser has “no other masters to serve” other than you, his client.
The CFP is more likely to work directly with the consumer than a CFA (chartered financial analyst), but many planners wear both badges. Or, your planner could be a ChFC (chartered financial consultant).
Although they make for busy business cards, additional initials tell you their specialties. “You don’t go to a podiatrist for heart disease,” Ehlert said. “So why would you go to any financial planner with any financial question?”
A CTFA (certified trust and financial adviser) focuses on your trusts, while a CFDP (certified financial divorce practitioner) helps you pre- and post-divorce. If your parents will need long-term care, take them to a CASL (chartered adviser for senior living) or RFG (registered financial gerontologist).
Preceding his public pledge to leave his money to charities, Sting might have consulted a CAP (chartered adviser in philanthropy). After he wraps his last tour, he could see a CRPC (chartered retirement planning counselor).
Stocking up. If you only want help juggling your investments, you might employ someone who labels himself an “asset manager” or “portfolio manager,” although these are vague terms.
The term “investment adviser” is a legal term for someone registered with the SEC (Securities and Exchange Commission) or your state securities regulator.
Though tossed about informally, the term “broker-dealer” refers to a person or company that buys/sells securities, and a “broker” is a person who buys/sells on your behalf. Technically, he is a “registered representative.” The firm may call itself “full-service” or “discount.” Using the latter is cheaper but means you do your own research.
To venture beyond vanilla stocks and bonds, consult a CAIA (chartered alternative investment analyst).
Beyond planning. A CPA or an EA (enrolled agent) can help you file your taxes, but many EAs specialize in resolving disputes with the IRS. A CMA (certified management accountant) focuses more on business analyses than taxes.
You don’t have to be rich to benefit from trusts and estate planning, which call for the addition of a lawyer, whose initials may include JD (Juris Doctor) or LLM (Master of Laws degree). The latter gives him international credibility. If you’re an entrepreneur with a new business plan, you may consult an MBA (Master of Business Administration).
Even if you understand the basics of home, health and auto insurance, your financial plan may call for trickier insurance products such as annuities, life insurance, disability income or long-term-care insurance. The CLU acronym is the gold standard here.
Look behind the curtain. The number of initials after a professional’s name does not necessarily mean he is better than the next one. In a rural area, he may be a jack-of-all-trades. In an urban area, he’s more likely to be part of a larger firm, where you meet with different people as your life transitions.
If in doubt, track the initials back to the groups that bestow them and keep track of which ones have gone Bernard Madoff. Many come from the College for Financial Planning, but sources also include colleges and government entities. Some blur the lines, like FINRA (Financial Industry Regulatory Authority), the independent nonprofit authorized by Congress to watchdog securities firms.
Many a financial adviser offers a free initial session so you can determine if you want a long-term relationship with him. This is your money. So, regardless of his other initials, your adviser should at least earn your T-R-U-S-T.
©2014 Chicago Tribune
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