Hiring a fee-only financial planner.

This is the second column to expand on the suggestions made in my January "New Year's Resolutions" column. (The January column can be found in the archives at www.skinandallergynews.com.)

The suggestion on long-range financial planning generated a lot of feedback. It seems that many readers are concerned that all aspects of their finances might not be in the best possible shape, and several shared unsatisfactory experiences with financial planners.

Believe me, I've been there. The problem, as so many of us have learned the hard way, is that anyone can claim to be a financial planner. There are no officially sanctioned requirements, and there is no government agency to regulate them.

Of the estimated quarter-million people who call themselves financial planners, only a small percentage have any real training, qualifications, or expertise in financial matters. Most are just salespeople whose priority is to sell you financial instruments. Creating a plan consistent with your long-term investment and retirement goals is secondary.

Many have an annoying habit of "churning" accounts: buying and selling frequently to generate commissions and service charges for themselves, claiming they can "beat the market" (at the expense of the value of your portfolio).

Many of them know little or nothing about investing beyond the investments their employers tell them to sell, which may or may not be what you need. Ask about alternatives and you'll get a blank stare.

One solution is to hire a fee-only planner who will charge you a flat fee for his or her services rather than take a commission on everything you buy or sell. In addition to removing the obvious conflict of interest, fee-only planners tend to have more extensive training in a broad range of financial fields. Their role is that of adviser, helping you choose the instruments most consistent with your needs and goals.

You can find a fee-only planner by asking friends and colleagues for referrals, or by consulting one of several trade organizations. The National Association of Personal Financial Advisors (www.napfa.org) is the most prominent fee-only organization.

Never hire an adviser who solicits you. Good fee-only planners are rare and busy, and they never have the time or need to make cold calls.

As with anyone else you hire, always ask for references and check qualifications and credentials. At the very least, an adviser should hold one of the three legitimate credentials of the industry: Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), or Personal Financial Specialist (PFS). None of these designations, however, carries a guarantee of adequate experience or education.

Ask to see the planner's ADV form, parts I and II. This document, which must be filed with the Securities and Exchange Commission, outlines the adviser's compensation, whether by commissions or straight fees. (Be sure you are not dealing with one of the few shifty advisers who accept both.) It also details disciplinary actions, if any. Be immediately wary of any adviser who does not freely offer this form upon request.

Once you've chosen an adviser, keep a close watch on the plan being built on your behalf. Make sure the investments are conservative and varied, not concentrated on a few of the adviser's favorites or the financial flavor of the week.

Your planner should be able to converse intelligently about alternatives to his or her recommendations. An adviser who can't or won't do so is lazy, or letting ego interfere with responsibility, and may need to be replaced.

Good financial planners keep their clients well diversified and they make sure that other aspects of clients' finances--budgets, credit ratings, insurance coverage, tax situations, education funds, estate plans, and retirement accounts--are in the best shape possible.

And unlike advisers-cure-salespeople trying to generate extra income for themselves, they won't try to convince you that you can amass a fortune quickly or easily.

BY JOSEPH S. EASTERN, M.D.

DR. EASTERN practices dermatology and dermatologic surgery in Belleville, N.J. To respond to this column, write Dr. Eastern at our editorial offices or e-mail him at sknews@elsevier.com.