When Chris DeSmedt first hired a financial planner a couple of years ago, he was far from a financial dolt. Bringing in $140,000 a year as a recruiter for the IT industry, the Lake Mary, Fla., resident and his wife, Michelle, had been diligent investors and savers since marrying several years earlier. The couple had a healthy portfolio of stocks, IRAs and 401(k) funds -- plus an aggressive savings plan.
And yet DeSmedt, now 32, found himself overwhelmed by his vast array of financial options -- more so after the couple had their first child and DeSmedt started his own recruiting firm.
"I had a lot of fear," he says. "I thought, 'What if something happens to me and I'm running this little company? Is my wife protected? Is my daughter protected?' I didn't know what my finances were supposed to look like."
Many people have these same fears and uncertainties -- no matter their net worth or age. And many have thought of hiring a professional financial planner, but the steep fees -- usually around $200 per hour -- can seem hard to justify.
Do we need professional help?
For DeSmedt, the quarterly conversations with his planner help him decide which stocks to choose and which insurance policy to buy; they also helped put his mind at ease when a new house meant his savings would diminish. "Unless you're someone who knows the financial sector really well, I think (financial planning) is pretty much for everyone," DeSmedt says. "You need to know what's going on with your money." Checklist: Finding the right financial planner
Even so, a sum like the $3,125 DeSmedt pays annually can be intimidating to many folks. Planners often charge 1% to 2% of a person's assets for hands-on money-management services. That can be especially daunting since the industry is relatively new -- born of the 1990s stock-market mania -- and still unregulated.
"Buyer beware" is still the operative message here, warns Council of Better Business Bureaus spokesman Steve Cox. "The absence of uniform industry standards means that consumers must do their homework before they hire anyone," Cox says.
The good news is that the BBB reports a relatively low number of complaints about financial planners -- just 548 complaints were logged in 2006, ranking the industry No. 266 out of more than 3,800.
(To find a quality professional -- and not just someone with a hunch about the market -- choose a planner affiliated with the National Association of Personal Financial Advisors or check with the Better Business Bureau.) What the planner told them
The fact remains that the financial landscape is increasingly complicated, and most people are not savvy enough -- or interested enough -- to navigate the tangle of investment strategies, mortgage options and tax laws that affect many of us.
The question is, when do your finances become too complicated for you to handle alone? Even professionals disagree there. Is it worth the money?
Martin P. Mesecke, owner of Self Worth Financial Planning in Plano, Texas, goes so far as to say: "Everyone needs a financial planner, including personal financial advisers themselves."
Mesecke runs "Newly Wealth" -- a program for young couples. He believes the emotional element of money issues make them too tricky to be solved with software, books and interactive Web sites.
"The legal profession has a saying that attorneys who represents themselves in legal matters have a fool for a client. The same could be said for financial professionals. You can be too close to the problem and need someone to talk it through."
For example, he points out, many young people have not considered things like caring for an aging parent -- emotional issues that can have huge financial consequences. Mesecke and many of his peers agree that trained professionals can help a client separate feelings from facts on such issues, to better focus on the problem at hand. Getting a reality check
At the other end of the spectrum of opinion is Brian T. Jones, the 32-year-old author of "Getting Started: The Financial Guide for a Younger Generation" (Larstan, 2006).
Jones, who manages $70 million in assets and figures two-thirds of his clients are under age 45, bristles at his industry's self-importance. "Unless you've accumulated assets of a minimum of $150,000 and are making in the low six figures, your situation does not warrant you having to outsource to someone else," Jones says.
And as for the emotional guidance a planner can offer, Jones believes that potential financial-planning clients must figure out their personal goals -- buying a house, having a child -- on their own time. "You need to have your crap together before you come to see me," he says.
Even Daniel Moisand, the president of the Financial Planning Association, isn't convinced that everyone in America needs his industry's services.
The majority of people are capable of understanding most financial-planning tools, Moisand says. But most people choose not to -- and those people are growing in number as the complexities of
mortgages, credit cards, investment vehicles and retirement plans grow more nuanced and intimidating.
"It's not that much different from hiring a professional for anything else you could do yourself -- that includes getting your yard mowed," says Moisand, who is also a principal at Spraker, Fitzgerald, Tamayo & Moisand in Melbourne, Fla. "I don't mow my own lawn. It's not that I'm not incapable of it. I could squeeze in the time, but it's not my inclination."
Still, Moisand gives a plug to his peers: "I don't want to give the impression that someone who uses software or reads magazines is just as skilled as a trained professional.
"When you're young and at the beginning of your working life, the best indicator of financial success is not picking stocks or mutual funds," he adds. "Success is whether you spend less than you make and save and invest regularly. Some need coaching in that; others do not."
Published April 22, 2008
High