Seeking an Investment Advisor

The Jacksons knew they needed help with their wealth-building strategy--here's how they finally found the right financial planner

is divided into two groups, as far as pay is concerned. The first, fee-only planners, make a set percentage off of funds they manage for you, usually in the neighborhood of 1% of your money under management. Other fee-only planners charge a flat annual fee. Fee-only planners make great sense. They’re paid no matter what, so the logic goes that they’re not biased toward any particular type of investment. The problem is, in order to make a living off of fee-only planning, an advisor has to establish an account minimum, very often in the hundreds of thousands of dollars.

Other financial planners opt for commissions. Commissioned planners are paid a percentage of the money they invest for you. That can often take the form of a load or purchase fee on a financial instrument like a mutual fund, which can run anywhere from 1% to 5% of the money you invest.

While Percy Bolton says he’s strictly fee-only, he says too much attention is paid to the fee distinction between the two groups of planners. Instead, he advises that you get terms spelled out up front.

TIP THREE:
Have your planner tell you how he or she invests. The Jacksons keep in touch with Peltier, to get regular updates on their money. They step up the number of visits any time they’re about to undergo a big financial change. That includes the last few months, when they applied for a consolidation loan to lower their mortgage payments on their second home to about $800 a month. (They now rent out their first home.)

Another case in point: a couple of years ago, when Peltier said it was time for them to get a long-term savings plan under way for their kids. That included investing in the VUL account and deciding which mutual funds to select for a general savings plan.

First, Peltier explained the Rule of 72 to the Jacksons. “He said that you can easily figure out how quickly your savings double when you take the expected annual return and divide it into 72,” recalls Dawn.

Peltier used the stock market as an example. Assuming stocks keep to historical patterns and return investors an average of 10% a year, you can assume that your investment will increase 100% in roughly seven years, or the rounded-off answer of 72 divided by 10.

The illustration worked. Dawn and Scott saw the need to get into the market, and decided to put $500 a month to mutual funds. Their choices? The same funds Peltier invests in: Oppenheimer Main Street Income and Growth, Oppenheimer Growth and Oppenheimer International. They also found out that Peltier’s firm, W.M.A., would get a 4.75% cut of the Jacksons’ investment, of which Peltier would receive 75%.

TIP FOUR:
Check to see how your planner is keeping abreast of changes in the industry. Tax laws, new products and new funds have a way of cropping up in bunches. Financial planner Bolton says no one within his industry can afford to remain in a shell with changes coming quickly

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