PRN: Understanding Advisors

Dummies' Guideto Financial Planning

Dummies'Guide to Mutual Funds.

In our never-ending quest to shed lighton our tangled financial affairs, I spokerecently to William Urban, a principal inthe financial advisory firm of Bingham,Osborn, and Scarborough, based in theSan Francisco area. Of note, he was thetechnical editor for the and the

Dr. Brown:

What are the biggestmisconceptions about what financialplanners really do?

Mr. Urban:

People seem to think thatour main function is to out-time and outperformthe basic market indexes.

Dr. Brown:

So what core competenciesshould people look for and expectfrom a financial planner?

Mr. Urban:

Our purpose is to helppeople plan for their lifetime financialgoals, demystifying the process as muchas possible, with an eye toward controllingcosts and taxes. This is important in alow-yield market period. We help peopleto discipline themselves by employingappropriate diversification and avoidingshort-term performance goals.

Dr. Brown:

How can you tell if someonecould benefit most from a financialplanner's services?

Mr. Urban:

Most people could bene-fit in some way because people tend tolack objectivity about themselves andtheir financial behavior.

Dr. Brown:

How do you suggest peopleidentify an appropriate advisor?

Mr. Urban:

Worth

BloombergWealth Manager

Try to get recommendationsfrom people or organizationsin somewhat similar circumstances. Orrefer to the Financial Planning Association(fpanet.org) and media lists,such as magazine or . Ask your attorney orCPA. Then talk to 2 or 3 planners andnarrow it down to someone you canrelate to and trust.

Dr. Brown:

What requirements areneeded for someone to call themselves afinancial advisor or planner?

Mr. Urban:

There are no requiredstate or federal licenses to start in thisfield, so you do need to be careful.Among the many initials you will seefrom various voluntary organizations, Ithink the most valuable is the CertifiedFinancial Planner™ practitioner. The education,experience, and ethics requirementsare quite high and should allowthe client some reassurance. There areabout 35,000 Certified Financial Planner™ practitioners in the United States.Internationally, the other recognizedcertification is the Certified FinancialAnalyst, of which there are about 50,000.This designation refers to high standardsin investment management.

Dr. Brown:

How are physiciansviewed by the financial community?

Mr. Urban:

Physicians are easier todeal with than other individuals with asimilar net worth, in my experience, butthe prevailing view is that doctors arewilling to take big risks with their money,which seems to be in contrast with theirconservative professional activity.

Dr. Brown:

If you are looking for anadvisor, should you try to get one whodeals with people of much higher worththan you to find a "better" advisor?

Mr. Urban:

Not necessarily. Eachfinancial tier has its own needs andrequires people who have specializedknowledge and experience with thatlevel. The most underserved are those ofa net worth less than $500,000. The toolsare available, but good, affordableadvice is rare because that market isn'tprofitable. The time investment is thesame for each client, but the much lowerreturn is a disincentive.

Dr. Brown:

What else should doctorsknow about your business?

Mr. Urban:

A planner with an assistantcan handle about 60 to 70 clients;without an assistant, perhaps 40. Typicalfees in the industry are very roughly 1%of assets under management. On thisbasis, the interests of the client and themanager are aligned; if the client movestoward their goal, the advisor alsoadvances toward theirs.

Dr. Brown:

What are the "hot" areasbeing studied now in your field?

Mr. Urban:

We're very interested inhow human psychology affects financialplanning and investment. Economiccycles and the various markets seem tobe affected significantly, too. Anotherarea that is not understood well enoughis the reporting and quantifying of risk,and it, too, is being looked at.

Dr. Brown:

Can you recommend agood book for an overview of investing?

Mr. Urban:

A RandomWalk Down Wall Street

My favorite is by BurtonMalkiel. It was published in 1970, but Ithink it is still in print.

Dr. Brown:

Finally, what do you lookfor in an ideal client?

Mr. Urban:

A willingness to listen, toimplement, and to trust. Someone whohas realistic expectations about what canand cannot be achieved.

Dr. Brown:

Thank you. If anyone hasany questions for Mr. Urban, he can bereached at info@bosinvest.com.

Jeff Brown, a partner on theStanford Graduate School ofBusiness Alumni ConsultingTeam, teaches in the StanfordSchool of Medicine FamilyPractice Program. He welcomes questionsor comments at jeffebrownmd@aol.com.