Financial Plans Not Just About Cash

Client’s values are key point

by Craig Wolf

TUESDAY, FEBRUARY 21, 2006

Wappingers Falls – You’d think the business of a certified financial planner is mostly about money, but Daniel J. Murphy offers a different insight.

“The basic thing is having a deep caring for people,” he said. Being a planner goes beyond prescribing the strategies or recommending stocks. It involves learning a lot about a client’s family, personal goals, financial situation and risk tolerance, for example. “They’ve got to really like helping people – help them solve their situations”, he said.

Murphy’s been in the financial planning business for 20 years. He has his own company, Murphy Wealth Management Group. He expects it will grow substantially as the 70 million-strong baby boom generation enters into its prime years of needing such advice and being able to pay for it. Leading-edge boomers, born in 1946 begin turning 60 this year. Government statisticians figure this profession will grow faster than average, too.

Murphy cautions this is not an easy business for young people to get into. There’s the increased education experience requirements, for one reason. Then there’s the question of making money. Finding customers through old-fashioned “cold calling”, just phoning people at random, is heavily restricted by new laws creating “do not call” lists many people have joined. Early years won’t be big money ones, he cautions.

Big financial companies, from banks to brokerages, hire many planners or financial consultants, but they fire them too. Registered rep magazine reported in August that Morgan Stanley fired 1,000 brokers nationwide who didn’t meet minimum production guidelines, such as that brokers who have eight years’ experience must produce more than $225,000.

Big firms give training. Working for one of those firms is a training experience in itself, Murphy said. “I always tell young people who come in for an interview to get an internship with a firm, and bigger is better. The bigger firms really spend a lot of resources on new hires”. The field is clearly growing. The Certified Financial Planner Board of Standards recently reported the number of certified people has passed 50,000 with 3,337 of them in New York State. The November two-day exam was taken by the largest number of applicants in its history, said a recent news release from the board. “Of the 2,702 individuals who sat for the November 2005 exam, 63% (1,690) passed”, the board said.

Not all planners have the “certified” designation, nor are there any law requiring it. There are also other programs, such as the chartered financial analyst designation and specialty ones such as chartered life underwriter, for life insurance. Marist College in Poughkeepsie offers a certification program with 6 courses that prepare a person to take the board test.

Murphy spends most of his time on retirement planning and ranks estate planning as the second-most popular subject. Insurance, including long-term care health coverage, is another big area. “Most of my clients are planning for retirement or are retired”, he said. IBMers and ex-IBMers are among his clients, and he notes, “While I’m not happy with the changes in the pension, I am happy about the 401(k) changes.” IBM eliminated pensions for new hires, but souped up the 401(k) and began automatic enrollment.

He urges young people to start investing young, taking advantage of tax-deferred employer plans, 401(k) for-profits, 403(b) for non-profits and 457 plans for government employees.

What is Murphy’s most difficult task? “College Planning by far is the hardest thing I do”, he said. There are many uncertainties involved, including whether the child ever goes to college or not. He likes a mix of 529 plans and custodial accounts to get flexibility.

Some planners work only on commissions while others work only on fees. Some, like Murphy, work on a mix of fees and commissions. Commissions come from selling investments, such as stocks, bonds or mutual funds through affiliation with a brokerage, in Murphy’s case, LPL Financial.

Most planners have a minimum investable portfolio size, which tends to limit their services to people whose assets are into the six-figure range, Murphy said his requirements vary, dropping, for example, for client’s children.

Murphy’s advice to those seeking a planner, other than choosing someone certified: “Find somebody that, personality-wise, you can get along with.” After all, Murphy said, “This is a relationship business.”