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CNN Live At Daybreak

Some Tips on How to Find a Financial Planner

Aired September 05, 2001 - 08:36   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
VINCE CELLINI, CNN ANCHOR: It's already September. Where did the summer go? Let's hope you're not wondering the same thing about your money. Where did that go? The money man, Dave Ramsey, has some tips this morning on how to find a financial planner.

Dave, good to see you.

CAROL LIN, CNN ANCHOR: Hi, Dave.

DAVE RAMSEY, DAVERAMSEY.COM: Good to see you. Thanks for having us.

LIN: We've got some e-mails here, so let's go right to do it.

Ron Wright, he's asking, "How do you go about finding a financial planner."

RAMSEY: Well, a good rule of thumb is the same way you'd find a tax accountant, or CPA or something like that is word of mouth really. Find someone who is happy with their planner, and honestly, you're going to, in that search, find some people who were not happy, and of course stay away from those folks. Word of mouth is the best way.

CELLINI: Let's go to another e-mail. This is from S. Kogan, who asks, "What kinds of traps do you look out for when choosing a financial planner?" Traps, Dave.

RAMSEY: Ah, the traps. Well, one thing you want to remember is you're not hiring a babysitter, OK. In the multitude of council, there's' safety, the proverbs says, so it's good to get counsel; it's good to have someone with a teachable spirit -- a teacher's spirit, rather than a salesman's spirit. That's who you want to deal with. So that's one trap. The other trap is, figure out how they're getting paid. Are they getting paid on commission? Therefore they have a little conflict of interest, or it a fee just for the advice? Are you just paying for a teacher. a fee-only planner?

LIN: Dave, is there someplace you can go to find out if the financial planner you're thinking of maybe has a criminal record or any complaints, consumer complaints against him.

RAMSEY: Well, certainly, the Better Business Bureau, as usual, your state securities department. You're state banking commission. As far as I know, none of the state's are regulating the financial- planning industry. There is of course the designation, the certified financial planner, the CFP, which is someone, if you have a lot of money, you're going to want to look for that CFP, because they're trained in dealing with the very rich.

CELLINI: Dave, when we talk to you, you're always mention how you try to get children involved and educate children on taking care of money, and if you can teach them, that's really part of the bigger picture, isn't it?

RAMSEY: It is. One of the big rules of thumb is, teach your kids how to handle money, or if you don't, they'll come home and live with you.

CELLINI: That's a good point.

LIN: All right, let's take a question from Robert Halperin here. And he asks, "I'm 70, and most of my savings are in IRAs. Do i sit with stocks like CMGI and Lucent and want a lot for a return to previous levels or do I bail out knowing that I will get no tax relief for the loss I will incur and try to get in on the low levels that good stocks are at?"

RAMSEY: Well, good stocks, as a single stock investor at 70 years old, that scares me to death. That's a lot of risk, regardless of the company names. I would be in good growth stock mutual funds, balanced funds, something where it is spread out there. There's a rule of thumb, you never keep a stock based on what it used to be, you keep it based on what it is going to be. That is called a cost sunk analysis. So would you buy it again today? If the answer is no, sell it. Keeping it in the sense, you bought it again.

CELLINI: So we should keep it simple, ultimately. You said no kind of extra baggage along when you're trying to set up your financial planner, just don't have too many attachments?

RAMSEY: Absolutely. And keep in mind, you've got to know what's going on, at the end of the day, if you're broke, it's your fault. So financial planners are not babysitters. This is not someone you can turn it off, I don't think about money anymore. This is someone who's you're teacher, who's guiding you, but you are the student. You're being mentored, you're being apprenticed, and learn this stuff, so you make competent decisions on your own. Do not just hand someone your money and then expect it to do anything but leave.

LIN: How much money should have you in order to think about a financial planer?

RAMSEY: If you're going to have a full-blown financial planner, usually, you are talking $2,000 to $4,000 in up-front fees to get it set up and rolling. And honestly, you need a million or more to fool with that. Most of us don't have to deal with that. Most of us can go through some simple checklists, make sure we have the right kinds of insurance, make sure we have the right kinds of savings going for retirement, make sure we're doing the right stuff on taxes and getting out of debt. and the basics really aren't hard. This is not rocket science. It's about doing it. LIN: And it's a million dollars, including the assets in your home, your real estate.

RAMSEY: Sure, your total pile of goodies.

LIN: Your total pile, OK.

CELLINI: So what would be the bare-bones minimum? If someone is looking for financial advice and can't really get into that financial planner thing, what would be the bare bones starting point for someone?

RAMSEY: Well, you probably need a good CPA or tax adviser, maybe a tax attorney. You definitely need a lawyer to draw up will and an estate plan. That is just a couple of hundred dollars, and if you get a good insurance person and a mutual funds broker, again, with the heart of a teacher, if you walk away feeling intimidated, feeling pushed upon, you got wrong person. Fire them. Get someone who wants to teach you. They want to keep you, your family and all your friends as clients forever and ever and keep you understanding what you are doing. Even if they are paid a commission, that's an OK way to it.

LIN: This e-mail says the solution seems to be they have 401(k) plan managing their finances. He says, "I don't have that much, but I have a 401(k) with Target. Should I just keep it all with them.

RAMSEY: Well, that's fine. 401(k) is fine, and you are picking a couple of good mutual funds as an option in there. We always suggest four types, growth, growth and income, aggressive growth, international, inside your 401(k), but see, that is not your whole picture, you need a will, you also need to have health insurance and disability insurance. You need to make sure your home owners and your auto insurance is right, your life insurance, that you've got that 10 times your income, and 15 to 20-year level terms insurance. Those kinds of things, those basic checklist things, don't all come out of 401(k).

LIN: OK, hey, Dave, I think you're coming back next week and you're going to be talking about how can we do it ourselves, right?

RAMSEY: Absolutely. And maybe some books, and some Web sites and some things like that. Also on our Web site at daveramsey.com, we've posted the 14 major components of a healthy financial plan. If you'll click financial planning there, you'll be able to do that.

LIN: Does one of them include marrying money?

CELLINI: She just won't let it go! It was a joke, that's all! Shared in privacy, then made public.

RAMSEY: You never know.

LIN: Nothing is off the record with us.

CELLINI: Dave, always great to hear from you, always very sound advice. Thanks a lot. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com