Should Young People See a Financial Planner?

Some experts say financial guidance at a young age is worth the cost.

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Most young people who are just starting out don't have a lot of money to save or invest—much less pay a professional to advise them on how to save and invest. But some experts say financial guidance at a young age is worth the cost. Yuval Bar-Or, founder of The Light Brigade, an Ellicott City, Md.-based company that offers financial literacy consulting, says financial planners are a good resource because they can examine your complete financial picture. "A planner can help by using their knowledge ... to come up with a game plan. For all investors—certainly young ones—it's a very good idea unless you feel that you can do it on your own," he says.

First, a word about financial planners and advisers. An investment adviser recommends products to clients, such as stocks, bonds, and mutual funds, and often manages their portfolios. Planners take a broader look at your finances—they also consider things like savings, debt, and taxes, and often offer suggestions concerning budgeting, estate planning, and education savings. Most planners are investment advisers as well, according to the Securities and Exchange Commission, but don't assume that an investment adviser is also a planner.

[See U.S. News's list of the 100 Best Mutual Funds for the Long Term, and use our Mutual Fund Score to find the best investments for you.]

For people with modest assets, Bar-Or recommends financial planners, who charge by the hour. A meeting may run a couple of hours and cost several hundred dollars. Once the sit-down is over, implementing the plan is up to you. (By contrast, financial advisors typically offer ongoing advice and may levy an annual fee or charge a percentage of assets.)

"An hourly adviser is better for someone younger with less assets because it's more cost-effective," says Don Humphreys, president of Harrington Park, N.J.-based Voyager Wealth Management, a fee-only independent registered investment advisory firm. "You can sit down and have a plan drawn up, be charged an hourly rate, pay a one-time fee, then go and execute your plan. [Using an adviser] usually ends up being more, but it's more appropriate for people with more complex investment portfolios."

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Here's an example of a typical meeting, according to Humphreys: "It could be as simple as coming up with a budget then scheduling a savings plan to build assets. If there are assets, then we could build a budget and talk about the [investing] portfolio process ... we also do overall wealth management and look at estate planning, wills. Or saving for college for those with young children. We could come up with the most efficient way of increasing savings and how taxes come into play with investing. "

Online resources can help you find a reputable financial planner. A good place to start is The Certified Financial Planner Board of Standards' website, where you can search for planners in your area who are certified by the CFP Board. The search results will note if a particular planner has been publicly disciplined by the Board. A scary truth is that anyone can call himself or herself a financial planner so it pays to double-check what you're told with organizations that issue credentials.

If you're worried that the meeting will be filled with pitches for more expensive services, Bar-Or suggests making your expectations clear when you arrange the meeting and say upfront that you're only interested in an overall plan, not specific products.

When it comes to implementing your plan—specifically the investing portion—Bar-Or recommends passive investments like index funds: "Fees on those have been driven down to really tiny levels, so [they make sense for] a young investor with relatively little money." Another way to keep more money in your pocket is to use a discount brokerage to execute trades online, he says.

[See Teaching Your Child Money Habits for Life.]

Corrected on 08/05/10: An earlier version of this article misspelled the name of Yuval Bar-Or.