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When to Hire a Financial Planner

Lots of people today, including stock and bond brokers, call themselves financial planners. A good suggestion is that if you hire a financial planner, you seriously consider a fee-only planner, who takes no commissions and works only for you. To find one in your area, contact the National Association of Personal Financial Advisors (NAPFA) or call 847-483-5400.

Some NAPFA-certified financial advisors work with you on an hourly basis. Others want to take your assets under management. Know that if you hire a financial planner who takes your assets under management, you typically pay a fee, usually 1.0 percent a year.

One percent is plenty; you shouldn’t pay more than that unless you’re getting help from that planner that extends to insurance, estate planning, and other matters beyond investing.

If you have a sizeable bond portfolio, a fee-only financial planner who is trading bonds for you can potentially save you enough money to compensate for his fee. Even though the planner will be dealing with a broker, just as you would, planners with numerous clients can bundle their bond purchases, so the broker often settles for a substantially lesser markup.

Here’s an example of this type of savings. Matthew Reznik, a NAPFA-certified financial planner with Balasa Dinverno & Foltz LLC of Itasca, Illinois, explains:

If an individual investor is buying a $25,000 bond for his or her portfolio, the markup can be as high as 2.25 percent. If that bond is yielding 5 percent, that’s a pretty big haircut. If we buy bonds, we buy the same issue in a $1 million piece. In that case the spread would be reduced to 0.10 percent.
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