No matter how much time you initially spent putting your financial plan together, make sure you review it annually. Make sure you do it at about the same time each year so you have a comparison without accounting for seasonal fluctuations.
Evaluate your progress toward each goal. If you are meeting your goals or are ahead of them –BRAVO. If you’re falling short, now is the time to adjust your plan or develop a new strategy. During your annual review make sure your asset allocation still fits you and your goals. The market can easily throw your asset allocation off. For example, you have 30% of your assets in bonds, but the portion of your assets that are in stocks has done so well that percentage-wise you now have only 15% in bonds – readjust your assets. Anytime you are reallocating be sure to consider tax implications of selling one asset to buy another. (This tax implication does not apply to monies moved among funds in the TSP.)
Additionally, your priorities may have changed. Changes in your marital status, number of dependents, or earnings capacity would result in a change in your asset allocation.
Finding Professional Help. Not everyone needs Professional Financial help! If you think professional help is needed, decide what degree of advice you want.
Note: If you know you are a procrastinator realize that the best plan in the world is worthless if it is not implemented! First, Look for Referrals – can friends or family members recommend someone they are using. Precaution: make sure the person making the recommendation is in a similar financial situation.
Second, Check with your State Securities Regulator or the National Association of Securities Dealers to verify registration status and any past infractions. (For the number of your State Securities division call the North American Securities Administrators Association: 202-737-0900 or hotline 1-800-289-9999.)
Interview several candidates – Remember you are “hiring them” to work for you. Find out about their educational background, experience, what they can do for you, how they make their money and how comfortable you are bearing your financial soul. This last issue may seem trivial but it is extremely important.
The issue of how the professional makes their money is also extremely important:
Commission — This transaction-based fee, 2% to 6% of your investment, is split between your planner and the company for which he or she sells. This arrangement presents a subtle conflict of interest, so your advisor’s integrity is key. Note: If you’re a frequent trader, flat fees are probably more cost-effective.
Fee-Offset — Some planners who are technically fee-based still sell commission products, using the money to offset fees they’re charging you. Make sure the arrangement will reduce your costs and provide you with suitable investments.
Fee-Based — These planners charge both commission and fees. Get an estimate of fees along with the percentage of commissions that the planner will be paid for products you buy.
Asset-Based Fees — This is an annual charge based on the percentage of assets a planner manages for you. Fees may run as high as 1.5% annually and should cover the cost of a comprehensive plan and building and managing a portfolio that meets you needs.
Retainer or Flat Fee — An annual or one-time fee that a planner charges for yearly planning or a specific planning task. The cost will depend on the complexity of your needs, but shouldn’t range higher than 1% of your assets.
Hourly Fees — Some planners charge by the hour to address specific client questions. Hourly fees range from $125 to $175. Make sure you get an estimate and the maximum you can be charged in writing. If you’re looking for ongoing service, an annual asset-based or retainer fee might be more cost-efficient.
Make sure to stay involved in your financial future.