Historically the financial services industry has not offered an advisory alternative for Do-It-Yourselfers. Investors who wanted help were forced to choose between either: an independent advisor using an assets under management (AUM) model; or a product-oriented, commissioned based advisor model. However, the fault does not lie entirely with the financial services industry.
Consumers are also to blame because they have been resistant to paying solely for financial advice. It is difficult to understand why consumers have refused to pay for objective, independent advice that would certainly be lower cost and arguably generate more benefit.
Consumers are facing a new reality that requires them to be more responsible for their financial security and success. The trends are undeniable. Retirement plans used to be risk-free and required little decision-making by the employee. Social Security was a much larger and more predictable source of retirement income. Employees changed jobs less and had fewer retirement resources to track. People used to not live as long. Taxes, although never simple, were not as complex. These and other factors are requiring people to make more complex decisions and invest more personally.
Where do consumers go for independent, fee-only advice on an as needed basis? Fortunately,there are some old and many new sources for this type of advice. The National Association of Personal Financial Advisors (NAPFA) was founded in 1983, and it is one of the oldest professional organizations dedicated to comprehensive, fee only financial planning. The National Association of Personal Financial Advisors is the largest professional association of comprehensive, Fee-Only financial planners in the United States. In addition, NAPFA members are required to fulfill significant continuing education requirements. The Garrett Planning Network (GPN) is a relatively newcomer, founded in 2000, and is dedicated to hourly, as needed advice. CPA's are increasingly offering financial planning advice to their clients.
Do-It-Yourselfers should require independence, competency, and coordination of all aspects of the financial plan.
Independence - All compensation is quoted and billed to the client on an hourly basis and no revenues are accepted from any other source.
Competency - Certified Public Accountant (CPA) preferably with a Personal Financial Specialist (PFS) specialty designation or Certified Financial Planner (CFP).
Coordination - Comprehensive plan combining employer retirement plans, social security, personal investments, life insurance, and personal assets.
A model process would include the following:
Gathering all needed documents and answering comprehensive personal and investment questionnaires.
Developing a comprehensive financial plan and investment policy statement.
Implementation and review of the plans as needed or every 2-3 years.
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