Investment Basics: Choosing your advisers

August 18, 2006

The right professionals will more than justify their fees. Here's what you need to know to hire the best.

This is the second in a series of Investment Basics articles to provide you with information about the fundamentals of investing.

Paying for financial advice may seem like an extravagance, particularly if you're just starting out or your situation is relatively simple. But that attitude is penny-wise and pound-foolish. An accountant, for instance, can give you direction in other financial areas besides taxes and help you avoid some common mistakes. If her advice saves you from just one blunder, it will be worth more than her fee. So it's a good idea to meet with an accountant once a year, even if it's only at tax time.

A financial planner can also prove well worth the money by helping you sort out your goals and devise a realistic savings and investment plan to achieve them. Then there are brokers and banks that offer advice and services that might be useful to you. Here's what you need to know about how these various advisers can help you.

To get this kind of tax planning doesn't mean that you necessarily need to sign up with a big national firm. But when you're looking for an accountant, try to find one who works with physicians. Someone with this kind of experience could charge as much as $200 an hour. That may sound steep, but remember that you're establishing an ongoing relationship for the future when, presumably, you'll have a higher income and need more sophisticated guidance.

Also look for someone who has the Certified Public Accountant designation, since CPAs must undergo rigorous testing and meet state-specific education and experience requirements. (For more on advisers' designations see "A guide to advisers' credentials, below.") However, non-CPAs can be competent, too.

Get references, and pick a person you feel you can trust. After all, your accountant will know your deepest financial secrets, money blunders, and spending peculiarities. Her personality is important, too-whether it's revved-up or low-key, conservative or aggressive-and should suit yours.

"Doctors are sometimes reluctant to ask questions," says practice management consultant Judy Bee. "Unless the accountant invites them, there can be communication problems. You need an adviser who'll anticipate your needs and outline options and scenarios you may not have thought of." If you feel uncomfortable communicating, it won't be a productive relationship.

One more thing: Your personal accountant may or may not be the right one for your practice. Your practice needs an accountant who has experience in the internal workings of a medical practice, which includes generating and overseeing financial statements. In addition, he should be able to set up processes that allow you to check your employees' accuracy, and mechanisms that will prevent or detect theft.

When you need a financial planner

These days, more and more accountants provide full financial planning services. So do you need a financial planner, too? Possibly.

Your accountant will be able to tell you the tax consequences of certain types of investments, but that doesn't necessarily mean she's the best person to choose the investments themselves. When it comes to picking stocks or mutual funds, your accountant may not be as well trained as a financial planner.