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Making Sense Out of Dollars

For women only

Part 4 of 7

Joel Lerner, Columnist
Posted 8/13/21

How Do You Choose a Financial Planner?

Once you have developed an overall-plan, you may want to “go it on your own”. Alternatively, you may use a financial professional, one who shares …

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Making Sense Out of Dollars

For women only

Part 4 of 7

Posted

How Do You Choose a Financial Planner?

Once you have developed an overall-plan, you may want to “go it on your own”. Alternatively, you may use a financial professional, one who shares your sense of values and objectives.

Financial planners are paid for their work in one of three ways: commission only, fee only, or fee plus commission. Under a commission-based compensation, financial advisors receive compensation from trades that they do, for you, whether or not they are profitable.

For fee-based accounts, there is an all-inclusive annual fee for financial recommendations and portfolio construction advice. This fee is a percentage based on the assets the client has in the portfolio. Therefore, the fee-based advisor does not have any incentive to trade a specific investment but rather to make certain the client’s assets grow.

When considering an individual as your financial professional, make certain to inquire about his or her education, degrees, and certificates. The most creditable credentials are The Certified Financial Planner (CFP) and the Charted Financial Consultant (ChFC) each requiring difficult education training, courses and testing.

Today, more than half of all American women work outside the home, at least part time. They are savvier about finances than their grandmother and even their mothers were. I applaud this transformation in women’s outlooks, and I encourage even more self-education through the following steps:

1. Find a qualified, licensed professional advisor who can help you draw up a financial plan. With your advisor’s assistance, develop a written statement of your personal investment policy, outlining your goals and risk tolerance. Why written? In times of high market volatility, it is tempting to make major changes based on an emotional response to peaks. and troughs. Referring back to your own statement of purpose will help you stay on course.

2. When you have decided on the type of financial professional you want, visit a few. Ask them for information on how other clients’ investments have performed under their guidance. And carefully try to assess how well the planners have been able to achieve for their clients the objectives you are seeking. But most important is to ask if you are comfortable with this person handling your financial affairs.

3. Develop a long-term, systematic investment philosophy and a well-allocated portfolio. (Portfolio or asset allocation refers to the mix of investment classes you utilize, including stocks, bonds, CDs, cash, etc.) With guidance from your chosen professional, set realistic expectations for performance and commit to an investment discipline that meets your comfort level. By this, I mean monthly investments that you can live with.

4. Make regular, periodic investments in order to take advantage of dollar cost averaging. Remember the adage: buy low, sell high. No one (not even a professional) can accurately and consistently predict market behavior. Since the market naturally rises and falls over time, investing at predetermined points throughout the year means that sometimes you will be buying when investment process are lower, sometimes higher. Over the lifetime of your investment plan, you will average out these cycles for maximum efficiency of your investment dollar.

THOUGHT OF THE WEEK

The most wonderful of all things in life is the discovery of another human being with whom one relationship has a glowing depth, beauty and joy as the years increase.

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