As any of my regular readers know, I am a veteran and proud of that fact.  Surprisingly, I am also at a regular loss of words when it comes to expressing my love, admiration, and thanks for those who have and continue to serve.  I think that military service is one of the highest forms of respect and service that can be shown and given to our Nation.

Maybe I have become jaded with age, but it amazes me every time I see young men and women choose to serve others before themselves.  I personally think that, like many other nations, every American should be required to serve our Nation in some capacity.  That belief is tempered by my knowledge that only the best and brightest “choose” to do so today, setting themselves apart and ultimately in my eyes above those that “choose” not to serve.

I believe that this video accurately expresses that feeling and the respect we should all have for our Veteran’s.

Since Memorial Day (Originally Decoration Day) first started in the 1860s as a way to honor those that had fought and died in the Civil War, much has changed. Traditional observance of Memorial Day has diminished over the years. Many Americans have forgotten or never known the meaning and traditions of Memorial Day. At cemeteries across the country, the graves of the fallen are increasingly ignored and neglected. Most people no longer remember the proper flag etiquette for the day. Even sadder, some people think the day is for honoring any and all dead, not just those fallen in service to our country. And while there are towns and cities that still hold Memorial Day parades, many have not held a parade in decades.

I have had the unfortunate honor and privilege of both escorting our fallen soldiers on their return to the US from Iraq and Afghanistan while working at Ramstein Air Base in Germany and participating in the graveside services of veterans as a member of the National Guard. In both instances I had the distinct feeling that I was performing a sacred duty and that it was my utmost responsibility to carry out that duty in the most professional and humble way possible. Again, I find myself turning to video to convey my true feelings.

On this Memorial Day, please remember those that have given everything to our country and helped to make it great. In closing, I would like to share the following:

It is the Soldier, not the minister
Who has given us freedom of religion.

It is the Soldier, not the reporter
Who has given us freedom of the press.

It is the Soldier, not the poet
Who has given us freedom of speech.

It is the Soldier, not the campus organizer
Who has given us freedom to protest.

It is the Soldier, not the lawyer
Who has given us the right to a fair trial.

It is the Soldier, not the politician
Who has given us the right to vote.

It is the Soldier who salutes the flag,
Who serves beneath the flag,
And whose coffin is draped by the flag,
Who allows the protester to burn the flag.

My last article focused on tax savings tips, unfortunately, I haven’t even started on my 2009 tax return.  Needless to say, I’ll be filing for an extension instead of rushing to finish and file my 2009 tax return by April 15^th.

If you’re in a similar situation, you may want to file a Form 4868, Application for Automatic Extension for Time to File U.S. Individual Income Tax Returns.  Particularly if you need more time to do a thorough job preparing your tax return.  This has affected a lot of tax filers this year who have had to deal with many of the new tax issues/changes that took effect in 2009.

Another reason to file an extension is that many financial institutions are still sending corrected form 1099s with revised amounts for qualified dividends and foreign taxes. Taxpayers with investment income may want to file an extension if they typically receive a corrected form 1099.

Filing an extension is pretty easy to do and gives you a huge advantage – an additional six months (until October 15^th, 2010) to file your final 2009 tax return.  Not to mention it will save you time and money later.  This is because you will owe the IRS penalties and interest if you don’t file a tax return or at least an extension by April 15th.

One commonly overlooked and costly mistake faced by many who may consider filing or do file an extension – the need to file an extension for your state tax return as well.  This is an easily avoided, yet costly error, so don’t do it.

Even though filing an extension gives you an additional six months to finalize your taxes, it does NOT give you an extension to pay the taxes you owe. If you think that you may owe taxes, then you will still need to calculate a reasonable estimate of the taxes owed and submit a payment with your Form 4868.

Be sure to pay at least 90 percent of what you think you owe to avoid any late payment penalties.  Additionally, if you want to avoid paying any additional interest for paying late, you have to pay the full amount of the tax liability owed.  (NOTE: Currently the IRS interest rate for late payments is 4 percent, so maybe it isn’t a big deal, but I hate having to pay one cent more than I need to.)  This is one area where it pays to error on the side of caution – READ AS “it is better to overpay versus underpay” to avoid a hefty penalty.

Lastly, don’t worry — according to the IRS, filing for an extension does not make your return any more likely to be the target of an IRS audit.

As always, I recommend that you work with a “Financial Professional”, in this case a CPA or tax professional.  Specifically a CPA or tax professional that understands the business of taxes and finances and can provide trusted advice and services during the tax season and throughout the year to come.

Finally, don’t feel bad about trying to save money on your taxes – don’t cheat, but definitely do everything legally in your power to avoid them.  As a little motivation, a quote from Judge Learned Hand – “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Good Luck!

TheProAdvisor

As tax day 2010 approaches, here are a few tips that will help you file saving as much as you can, with as little effort as possible and on time.  For those of you new to this blog – I hate taxes.  Income Tax, Estate Tax, Sales Tax, Gas Tax, You-name-it Tax – I loathe them all equally.

With that, your best strategy for minimizing tax liability and bolstering your financial position is to stay current on tax law. However, in a time of sweeping change, new legislation and regulations, continuing economic uncertainties, doing so can be a challenge.

In 2009, tax law changes ranged from tax credits for employees and undergraduate students to tax breaks for first-time homebuyers and unemployment assistance for workers involuntarily terminated. Yet, what remains constant is the need for in-depth knowledge when preparing your taxes. Tax Saving Tips for 2009 provides an overview of key tax law changes that may affect your return and the latest information and practical strategies for minimizing your tax bill.

Should you have any questions or concerns, a CPA tax professional can review your overall financial picture to help you identify winning tax strategies.

Filing Basics

Filing Status Taxpayers can file as single, married filing jointly, married filing separately, head of household or qualifying widow(er). If you are married and filing jointly, you can take advantage of tax credits and benefits not available to couples filing separately. Unmarried taxpayers may file as single or, if they qualify, as head of household. If more than one filing status applies to you, you may want to choose the one that result in the lowest tax obligation.

Exemptions

You may claim a personal exemption for yourself, your spouse and each of your dependents. A dependent child includes children born to your family, stepchildren, foster children and adopted children. Each exemption reduces taxable income by $3,650 in 2009. However, the exemption benefit is lost if your adjusted gross income (AGI) is above the amounts indicated below:

Deductions

The basic standard deduction for 2009 is $5,700 if single or married filing separately, $11,400 for married filing jointly or qualifying widow(er) and $8,350 for head of household. Taxpayers age 65 and older and/or blind receive an additional standard deduction of $1,100, and $1,400 if the individual is also unmarried and does not have a surviving spouse. In addition to above-the-line deductions, you can claim the standard deduction or choose to itemize your deductions. Itemized deductions include specific state and local taxes, mortgage interest, and charitable contributions.

Even if you do not itemize, some deductions are still available, including traditional IRA, SEP and qualified plan contributions and contributions to Health Savings Accounts. In general, you should itemize if your total allowable itemized deductions are more than the standard deduction, although there are exceptions. Keep in mind that the value of some of your itemized deductions will be reduced if your AGI is above $166,800 ($83,400 if married filing separately). This reduction will be eliminated in 2010.

Tax Breaks for Homeowners

First-Time Homebuyer Credit

The First-Time Homebuyer Credit increased to $8,000 in 2009 and is generally available for purchases made between January 1, 2009, and May 1, 2010, provided the home is occupied as the buyer’s principal residence within 24 months of the purchase. (Note: A first-time homebuyer is defined as someone who has not owned a principal residence in the three years before the purchase.) For purchases made after November 6, 2009, no credit is allowed if the purchase price exceeds $800,000. The credit only needs to be repaid if the home is sold within 36 months of the purchase date. For purchases made on or before November 6, 2009, the credit phases out for taxpayers with modified AGIs in excess of $75,000 ($150,000 for joint returns). The credit is refundable and recaptured if the home is sold within 36 months of the purchase date. For purchases made after November 6, 2009, the phase out starts at modified AGI of $225,000 for married taxpayers and $125,000 for all other taxpayers. The credit is completely phased out at modified AGI of $245,000 for married taxpayers and $145,000 for all other taxpayers.

Interest and Property Taxes

Home mortgage interest on up to $1 million ($500,000 if married filing separately) of home acquisition loans secured by your principal residence and/or second home is fully deductible. You also may deduct mortgage interest on a home equity loan or line of credit up to $100,000 ($50,000 if married filing separately). Therefore, you can deduct interest on total home debt up to $1.1 million ($550,000 if married filing separately).

Mortgage Debt Forgiveness

If you still have mortgage liability after foreclosure, any amount forgiven by the lender is generally ordinary income. However, for debt discharged on or after January 1, 2007, and before January 1, 2013, the debt forgiveness is treated as tax free if the property is your primary residence. The limit on qualifying debt is $2 million ($1 million for a married person filing separately).

Tax Exclusion of the Sale of a Principal Residence

When you sell your principal residence, you can exclude from income up to $250,000 in gains ($500,000 if married and filing jointly or a surviving spouse if the sale is within two years of the other spouse’s death). To qualify, you must have owned and used your home as a principal residence for at least two years during the five-year period ending on the date of sale.

Retirement Strategies

Retirement Savings Tax Breaks

Tax-advantaged retirement plans can help you lower your current tax bill and achieve a secure retirement. Recent legislation makes permanent higher IRA and 401(k) contribution limits.

Individual Retirement Account (IRA )

You may contribute up to $5,000 to fund a traditional or Roth IRA in 2009. Individuals age 50 or older by the end of 2009 can make an additional catch-up contribution of $1,000. If your spouse does not work for compensation, you can contribute to either a traditional IRA or Roth IRA for your spouse based on your own earnings, with the same dollar limits applying. However, the maximum aggregate that can be contributed to a Roth IRA is reduced by contributions made to other IRAs.

Traditional IRA contributions may be deductible depending on your modified AGI and whether you or your spouse (if filing jointly) is covered by an employer-sponsored retirement plan. Roth IRA contributions are not deductible, but the earnings accumulate tax deferred and may be withdrawn tax free if you meet the qualified distribution requirements.

For 2009, eligibility to contribute to a Roth IRA is phased out as modified AGI rises from $105,000 to $120,000 if single, head of household or married filing separately and not living with spouse at any time in 2009; and $166,000 to $176,000 if married filing jointly or qualifying widow(er). Married taxpayers who file separately and lived with a spouse at any time in 2009 cannot contribute to a Roth IRA if their income is $10,000 or more. Qualified dividend income from a domestic or qualified foreign company is taxed at a top rate of 15% (zero for taxpayers in the 10% or 15% tax brackets in 2009).

Offset Capital Gains with Losses

Net capital losses are fully deductible against capital gains. If your capital losses exceed your capital gains, you can deduct up to $3,000 in net capital losses against ordinary income ($1,500 if married filing separately) or your total net loss as shown in 1040 Schedule D, Capital Gains and Losses, whichever is less. Any remaining capital losses may be carried over to future years.

Other Recent Tax Law Changes

The Making Work Pay Credit

The Making Work Pay Credit provides employees, including the self employed, with up to a $400 tax credit ($800 for married people filing jointly). The credit is 6.2% of earned income and phases out at modified AGI of $75,000 to $95,000 for singles or $150,000 to $190,000 for married people filing jointly. In 2009, taxpayers will receive the credit through a reduction in employee withholding and self-employed required estimated tax payments.

Economic Recovery Payments

People receiving social security, SSI, railroad retirement and veteran’s disability compensation benefits also receive a one-time $250 payment, offset by any Making Work Pay Credit.

COBRA Premium Assistance

The federal government is subsidizing 65% of COBRA premiums for employees who are involuntarily terminated between September 1, 2008, and February 28, 2010. The premium subsidy is in effect for any premium for a period of coverage beginning on or after February 17, 2009, for 15 months. The tax-free element of this subsidy is reduced for singles with modified AGI between $125,000 and $145,000, and joint filers with modified AGI between $250,000 and $290,000. For singles with modified AGI above $145,000 and joint filers with modified AGI above $290,000, the subsidy is treated as gross income. If you are laid off, your employer should notify you about this rule.

Unemployment Compensation

Usually, state unemployment benefits paid to laid-off employees are taxed in full. However, in 2009, the first $2,400 of unemployment compensation you received is excluded from your gross income and not subject to tax.

Alternative Minimum Tax (AM T) Patch

Among the provisions included in the Emergency Economic Stabilization Act of 2008 is the AMT patch, which protects most middle-income taxpayers by increasing the AMT exemption amounts. The 2009 exempt amounts are: $46,700 for single filers and heads of household, $70,950 for married taxpayers filing jointly or qualifying widow(er)s and $35,475 for married taxpayers filing separately.

Employer-Sponsored 401(k)

Pre-tax contributions to employer-sponsored retirement plans reduce your taxable wages. Matching contributions and income earned within your plan also are tax deferred. The employee contribution limit for 2009 is $16,500. Employees age 50 or older by the end of 2009 may make an additional catch-up contribution of $5,500 for 2009. Also, there is no minimum distribution required in 2009 from your 401(k).

Child and Education-Related Tax Credits

Child Tax Credit

For 2009, the Child Tax Credit is worth $1,000 for each qualifying child who is under age 17 at the end of the calendar year and who qualifies as a dependent. The Child Tax Credit is in addition to the child’s dependency exemption. The credit begins to phase out when modified AGI exceeds $110,000 for married couples filing jointly; $55,000 for married taxpayers filing separately; and $75,000 for single filers, heads of households and qualified widow(er)s.

Dependent Care Credit

Parents who must pay for the care of a dependent under age 13, who they also claim as a dependent, while they work or look for work may be eligible for a tax credit of between 20% and 35% of qualifying expenses (up to $2,100). You must have earned income to receive the credit. For 2009, the maximum amount of expenses on which the credit can be claimed is $3,000 for the care of one dependent or $6,000 for two or more. This credit is not restricted to child-related care costs.

If you pay someone to look after an incapacitated dependent of any age, such as a parent or disabled family member, you may be eligible for this tax break.

The American Opportunity Tax Credit

This credit replaces the Hope Scholarship Credit. It is available for the first four years of college or other post-secondary school that leads to a degree (the Hope credit was only for the first two years of undergraduate school). The maximum credit is $2,500 per student for each year and 40% of the credit is refundable – that is, it can reduce the taxpayer’s liability below zero. It phases out at modified AGI levels between $160,000 and $180,000 (married filing jointly), and $80,000 and $90,000 (other filers). This credit is allowed against the Alternative Minimum Tax (discussed later).

Tax Considerations for Investors

Long-Term Capital Gains and Dividends

The maximum tax rate on net long-term capital gains remains at 15% for 2009. For taxpayers in the 10% or 15% tax brackets, the tax rate on long-term capital gains is zero. Capital gains on investments held for one year or less are taxed at regular income tax rates.

Health Coverage Tax Credit

As of May 1, 2009, the Health Coverage Tax Credit increased from 65% to 80% of the person’s premiums for the qualified health insurance of specific family members. This credit expires in 2011.

Some important numbers and items for 2010:

2009 Exemption

Phaseout Begins at:

• Single – $166,800 up to $289,300
• Married filing jointly/Qualifying widow(er) – $250,200 up to $372,700
• Married filing separately – $125,100 up to $186,350
• Head of household – $208,500 up to $331,000
• For 2009, even with an AGI in excess of the phaseout maximum, you still may take a $2,433 personal exemption. The personal exemption reduction is being phased out and will be fully repealed by 2010.

Common Deductions

Above the Line Deductions

• Teacher classroom expenses
• Student loan interest
• Alimony expenses
• One-half of self-employment tax
• IRA contributions and one-half of contributions to SEP, SIMPLE and qualified plans
• Health savings account contributions
• Moving expenses
• Penalties on early withdrawals from savings accounts
• Tuition and fees deductions

Itemized Deductions

• Mortgage interest including interest on equity loans up to $100,000
• Points paid for mortgage or refinancing
• State and local income taxes and personal property taxes
• Sales taxes in states with no income tax
• Health insurance costs and medical expenses in excess of 7.5% of adjusted gross income (AGI)
  • Prescription eyeglasses, contacts and hearing aids§
  • Crutches, canes and orthopedic shoes§
  • Medical transportation §
  • Cost of alcohol or drug abuse treatment§
• Charitable contributions – cash, property, donated clothing or household items and appreciated long-term assets
• Mileage and expenses associated with volunteer work
• Unreimbursed casualty and theft losses
• Income-tax preparation software and fees*
• Job-search expenses*
• Investment expenses*
• Unreimbursed employee business expenses*
• Professional investment advisory fees*

§ Deductible to the extent the total of all medical and dental expenses exceeds 7.5% of AGI

* Deductible as miscellaneous itemized deductions to the extent the total exceeds 2% of AGI

Obtain Professional Advice

This information is current as of January 1, 2010 – however, I always recommend that you work with a “Financial Professional”, in this case a CPA or tax professional.  Specifically a CPA or tax professional that understands the business of taxes and finances and can provide trusted advice and services during the tax season and throughout the year to come.

Finally, don’t feel bad about trying to save money on your taxes – don’t cheat, but definitely do everything legally in your power to avoid them.  As a little motivation, a quote from Judge Learned Hand in the case of Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff’d, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935):

“A transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade, taxation. Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Good Luck!

TheProAdvisor

I have actually spent the better part of the last week thinking about and reflecting on both the Marine Corps Birthday (Nov. 10th, 1775) and Veterans Day (Nov. 11th).  I found it very difficult to not only express my feelings on these two days, but to actually find something that paid even the slightest degree of respect that our service men and women deserve.  Fortunately, my friend Harry K. Jones has found the exact words that I wanted to convey.  I have inserted his posting in full below (I hope you don’t mind) and would ask you to also wish him and his family as Happy Veterans Day!

You would think that as a veteran of not one branch of service, but three (USMC 92-00, USANG 00-02, and USAFR 02-05), I would actually have a good idea of what it takes and means to be a member of our armed forces.  Well, I do and that is the problem – There is no way to adequately convey the actual honor, commitment, and selflessness that those who serve in our armed forces have in abundance.

Whether you find the current conflicts we are embroiled in to be right, wrong, or indifferent is beside the point.  Our Veterans, both past and present not only deserve our respect, but they should have our love and adulation as well.  On a daily basis they willingly and without complaint run towards danger, risking life and limb, to secure our freedom.  To these my brethren and sisters, I salute you and all that you do – Happy Veterans Day!  May it be a safe one and may you all return quickly home to your family and loved ones.

A Heartfelt Plea On Veterans Day

I take great pride in being a military Veteran.

I’m also proud to be father of a United States Marine.

I’ve had the unique privilege of visiting Arlington Cemetery where the site of more than 300,000 white crosses, marking the graves of brave soldiers who gave their lives for this country, takes your breath away.

I’ve stood atop the hill overlooking our nation’s capitol as I witnessed the traditional Changing of the Guard at the Tomb of the Unknown Soldier.

I’ve spent hours standing at the Vietnam Veterans Memorial Wall in D.C. paying my respects and watching thousands of others crying, praying, and conducting a traditional rubbing of the name of their loved ones. 58,195 names appear on that highly polished monument and countless tears have been shed in the silence and reverence in the shadow of that wall.

Having done these things makes it unusually effortless for me to know and feel the true meaning of Veterans Day. However, for many others, it’s nothing more than another day that the banks are closed and the mail isn’t delivered.

If you’re too busy to pause for a few minutes today in honor of Veterans, I suggest you examine closely what you’re doing that’s so important at this moment. I would also suggest you reflect on the fact that you’re only doing whatever it is because of our Veterans. It’s their training, dedication, effort, patriotism, and love of country that provide us with the freedom we so often take for granted.

Take just a moment or two out of your very busy schedule to view this video as a reminder of why we put this day aside to honor our Veterans. Upon completion of the video, I think you might want to seek out a Veteran or the family of a Veteran and provide a simple but heartfelt “Thank You” for the freedoms you enjoy every day of your life.

Personally, I don’t believe there should be a Veterans Day. A single day is a very small price to pay for the enormous sacrifice made by so many hundreds of thousands of American men and women to guarantee the freedom for so many others. I think every day should be Veterans Day.

In fact, for many people it is. Check the following link to see what goes on every day at the Dallas Fort Worth International Airport as our soldiers return home from all over the world. This too should bring a tear to your eye and maybe an incentive to treat this day as the hallowed day that it is.

Harry K. Jones is a professional speaker and consultant for AchieveMax®, Inc., a company of motivational speakers who provide custom-designed keynote presentations, seminars, and consulting services. Harry has appeared all over North America addressing topics such as change, customer service, creativity, employee retention, goal setting, leadership, stress management, teamwork and time management for a number of industries, including education, financial, government, healthcare, hospitality, and manufacturing. For more information on Harry’s presentations, please call 800-886-2MAX or fill out our contact form.

To all my fellow US Marines, their families, and loved ones – Happy 234th Birthday!

From our humble beginning in Tun Tavern, to the Halls of Montezuma, the Shores of Tripoli, the sands of the South Pacific, the frozen landscape of the Korean Peninsula, the steamy jungles of Vietnam, scorching deserts of Iraq, and the imposing mountains of Afghanistan we have “fought our countries battles” and brought honor to our Corps.

I wish each of you a safe and happy birthday.  Semper Fidelis!

Why does it matter if your financial advisor treats you as a client or a customer?  The answer is simple: the two words are legally very different and convey different rights. 

A customer is defined as “a person who buys goods or services from another.” 

A client is defined as “one under the care, protection, and guidance of an expert in a particular field.”

Imagine purchasing a life insurance policy, annuity, mutual fund, or similar financial product.  If you are called a customer during the process, the seller is shifting the burden of the purchase to you, the consumer.  You are the one who chose what to purchase.  As such, you are the one ultimately responsible for the purchase.

On the other hand, if you are called a client, the advisor is taking you under their care, protection, and guidance – not only figuratively, but legally as well.

In the financial services industry, this is called a fiduciary responsibility.  It can mean the difference in being up a creek without a paddle, or having legal standing and the ability to collect on any wrong doings.

A fiduciary is defined as “a person to whom property or power is entrusted for the benefit of another.”  To make this clearer – it is an advisor that has the legal and morale obligation to do what is best for you, at all times, even to their own detriment.

So, why is that important?  Don’t all advisors have to do this?  The answer is unfortunately no – most have no legal obligation to do what is best for you.  They only need to do what isn’t harmful to you.  Sound the same?  It isn’t, and here is why.  An advisor, free from the bonds of a fiduciary obligation, can select similar products, neither harmful to you – and determine which to offer based on factors beneficial to him.  These would include commissions, fees, allowances, and other incentives.

So even though one product or service may be a superior or better fit your needs, an advisor free of the fiduciary bonds can offer or exclude the one that doesn’t benefit the advisor the most.

While I would like to believe that the above scenario isn’t played out on a daily basis, the unfortunate truth is that it is being played out in living rooms, business conference rooms, and around kitchen tables regularly.  So how can you avoid being misled, ill-advised, and ripped off?

Find a “Financial Professional”, someone who adheres to the principles and guidelines of honesty, integrity, and true professionalism.  They will be a member of their local or national trade association.  They will have advanced education or designations that show they continue to be educated and improve their skills.  Finally, they will call those they work with their clients.

Don’t risk your financial future or well-being.  Take the few extra steps necessary to identify a “Financial Professional” – you will be glad you did.

Interviewing a financial advisor is just like interviewing a prospective employee.  In fact, a financial advisor is just that, an employee hired by you, to assist you with your financial needs.

Unfortunately, many advisors feel that you work for them, their families, and ultimately their financial needs.  Nothing is worse than a dishonest, uneducated, and self-centered advisor.  If you ever fill that your advisors puts his needs before yours, fire him – immediately!

If you are dealing with a true “Financial Professional” the interview should only take a few minutes during you first meeting with them.  A true “Financial Professional” will answer most of these questions prior to you actually beginning interview process.  

In fact, I have never meet a true “Financial Professional” that wasn’t willing and able to answer these questions, document their answers, and happy that you took the time to ask them.

The first question you need to ask them is what types of licensing or registration they have.  Most states require that an insurance license and other professional licensing be displayed.  Often the “Financial Professional” will have these displayed in their office or wherever your meeting takes place.  This isn’t showing off, rather it is their way of showing that they are a professional.

A “Financial Professional” will have all of the required licensing needed to assist you with your financial goals.  Some may not be registered; licensed to sell variable products like mutual funds, variable annuities, and individual stocks, but most will be.  The most common licenses and registrations are Life, Health, and Series 6, 63, and 7.

The second question you want to ask is what types of professional designations the advisor has.  Again the true “Financial Professional” will have them and proudly display that fact.  To earn them additional schooling, testing, and continuing education are required.  The most common designations are CFP® (Certified Financial Planner), CLU (Chartered Life Underwriter), and ChFC (Chartered Financial Consultant).

The third question you need to ask is what professional associations the potential advisors belongs to.  Again, this information will most likely be displayed prominently.  It is just one more way that the true “Financial Professional” shows their commitment to the industry, continued learning, and additional professional oversight.

Some of the most common are NAIFA (National Assoc. of Insurance & Financial Advisors – http://www.naifa.org/), SFSP (Society of Financial Professionals – http://www.financialpro.org/), and AALU (Assoc. of Advanced Life Underwriting – http://www.aalu.org).

The final question that you need to asks, is what types of services they provide and how the work with clients to implement them.  The true “Financial Professional” will have access to every type of product or service you may need.  They may not actually provide all of them themselves, but they will have partners/affiliates that do.  They will also take a consultative approach to financial planning.  They will help you accurately assess your needs, evaluate your goals, and provide input on how to best accomplish both.

They will likely employ multiple planning tools (software, needs analysis, risk tolerance profiles, etc.) before making any recommendations and they will want to participate in the entire process with you.

In short, the true “Financial Professional” will become part of your family.  In my practice, I routinely know that names of my clients, their children, grandchildren, their parents if still living, what types of activities they all participate in, how the children and grandchildren are doing in school, and what their goals and aspirations are.  All of this is essential to proper planning and ensures that you are working with a true “Financial Professional”, not just a salesman.

Finding a “Financial Professional” seems easy enough, flip through any phonebook or type in “life insurance”, “financial planning”, or “estate planning” into any search engine and you will be bombarded with more so-called advisors than you can handle.

He is a word of advice, don’t bother wasting your time.  While a search engine or even the phonebook can be useful tools, neither provide you with the information needed to find and identify an advisor versus a salesperson.  Instead follow the following steps:

1)       Ask for recommendations from your friends and family.  Many of them will have had experience with purchasing the financial service in question.  Ask them if they were interviewed to determine needs and wants, educated prior to making any selections, kept informed during the purchasing process, and if they have received subsequent regular follow-ups.

If the answers are “no” move on, if “yes”, then place them towards the top of any list you may compile.  Nothing is a reassuring as a good recommendation.

2)      Don’t stop there.  Be sure to check the credentials & professional designations, license status, and professional organization membership of the advisors in question.  You should find that they have active licenses, maintain their credentials and professional designations, and that they are members of their local, state, or national associations.

This is extremely important.  Without the above, the advisor is telling you that they don’t focus on additional / continuing education, don’t want the additional scrutiny of an association / organization membership, and that they can’t be bothered to maintain a valid license status.

Once you have found your potential candidates, it is now time to interview them.  Did you say interview?  Yes, I did –interviewing is one of the most important steps in the process.  Would you hire a new employee without interviewing them?  What about building an addition on your house or putting in a pool without getting multiple bids?  Hiring a “Financial Professional” is no different; as a matter of fact it is far more important.

It further allowed me to come to the conclusion that “the advisor is the ultimate constraint to a client’s financial success; thru their knowledge, conviction, and execution, or lack thereof the client succeeds or fails”.

That means that it is entirely the advisors responsibility to provide ALL of the tools for their client’s success.  Does this mean that the client is free from responsibility and that all blame rests at the feet of the advisor? 

No, nothing could be further from the truth.  The client should take an active and informed role in any financial planning as it is ultimately their goals, needs, desires, and wants at risk.

The client has the ultimate responsibility in finding, interviewing, and selecting their advisors.  And they should do so with extreme diligence.

The advisor or true “Financial Professional” will be prepared, educated, and ready to provide all of the tools that the client may need.  The “Financial Professional” will provide options, input, and expertise during the process, and encourage the client to make correct decisions based on knowledge, not fear.

To do anything less, reveals the advisor as nothing less than a salesperson.  Don’t settle for anything but a “Financial Professional” – to do so constrains you financial future and success.

I have a problem.  I watch the news and constantly see Suze Orman ( http://www.suzeorman.com) and other so-called “Experts” on financial matters giving generic and even bad advice.  As “Experts” shouldn’t they take the time to ask a few questions and ensure that they have a proper “diagnosis” prior to “prescribing” a solution?

One of my favorite quotes is “Prescription without diagnosis is malpractice”.  It accurately describes what is taking place in the world today.  So many people want to prescribe (sell) you a solution that they don’t even bother to accurately diagnose the problem.

When working with clients and financial professionals, I often say “I can’t prescribe what is best for you without a proper diagnosis, to do so would be unprofessional, not to mention unethical”.  Worse yet it can be catastrophic.

I was recently working with a client, Jim, and his CPA.  During our discussions he answered several of my questions with statements that didn’t make sense for his financial future.  When asked why he held these beliefs, or why he had made some specific choices with his finances, he stated that “it’s what Suze Orman tells everyone to do…”

Therein lays the problem.  Financial solutions are NOT cookie-cutter choices that apply to everyone equally.  Financial solutions can’t be effective without a proper “diagnosis”. 

To properly diagnose someone’s financial situation, it is an absolute necessity that questions are asked by a competent “Financial Professional”.  The questions should center on the clients goals, needs, and aspirations.

They should include questions like: 

“How much income would your family need today if you died?” and “How long would they need it?”

“What standard of living do you expect during retirement?” and “How long do you think retirement will last?”

“What do you want to happen at your death?”  and “What about at the death of your spouse?’

These questions should be answered honestly by the client and the clients’ goals should be the basis of any planning done. 

A true “Financial Professional” will provide input and information to help the client identify potential pitfalls and to provide a certain amount of clarity in the clients decision making process, however they will not force the client to follow a specific path.

Through education, professionalism, and dedication to the clients’ goals, the true “Financial Professional” will always provide a better result than the so-called “Experts”.

If your advisors aren’t asking these types of questions, or your haven’t fully disclosed your goals, it’s time to find a true “Financial Professional” that you can trust and partner with.