What can a financial planner do for you?

The free-falling Nasdaq and the slumping Dow are sending many do-it-yourself fed investors scurrying for advice from financial planners.

Clients of financial planners aren't immune to slumping markets. But unlike go-it-alone investors caught up in high-tech hype or water-cooler advice, most financial planning clients maintain a much more diversified portfolio, so their investments aren't hit as hard when a particular sector — or the market at large — tumbles.

Equally important, financial planners help keep you from overreacting to the markets' vicissitudes. Many investors lose money by jumping in and out of the market, either from greed or fear. A recent study by Phoenix Investment Partners Ltd. found that mutual fund investors lost 20 percent of their potential return by chasing performance. Financial planning clients are more apt to stay for the long term, with the knowledge that although markets go up and down, their investments likely will do fine in the long run.

More important, such clients have someone to navigate them — even hold their hand — through the stomach-churning times by helping them select investments most appropriate for their goals and time horizon.

But financial planners do much more than provide investment advice. For one thing, they help you determine why you are investing in the first place. For example, there's the story of a medical professional who came to a certified financial planner because he wanted to earn a higher return on his portfolio.

Instead of immediately "crunching numbers" and reallocating the man's portfolio, the planner talked to him about why he wanted to earn a higher return. The man said he wanted to retire as soon as possible because the stress at work was literally, according to his cardiologist, killing him. His plan was to work longer hours, kick in more to his retirement plan, boost returns and quit as soon as possible. Instead of looking for ways to boost return, the planner recommended that the man cut back his hours and make his portfolio slightly more conservative instead of more aggressive. Today, the client is enjoying his work, and his blood pressure is down.

The investor could just have easily tried to boost returns on his own. Numerous retirement calculator sites on the Internet would have told him what to do and even where to invest. What they wouldn't have told him was what he really needed to do: Readjust his goals and slow down.

Helping you define what you really want from your life is one of the major benefits planners can provide for you. They'll ask, Do you want to retire early, start a new career or business, or move? For example, one of the struggles for many baby boomers is how to balance competing goals of funding retirement, helping children pay for college and financially assisting elderly parents. You won't find such answers online. Dealing with those matters calls for a thorough review of your individual situation and making some tough decisions.

By clearly defining what you want to achieve, a planner can plot a course that will take you where you want to go. Investing typically will be part of that. But so will many other aspects of your financial life: insurance, estate planning, income taxes and budgeting. All those elements must work together for you to reach your goals.

A financial planner also can help you through other challenging times besides slumping stock markets. With the counsel of a financial planner, families can better handle such crises as a death in the family, a job loss, a disability or a catastrophic illness. Planners can even help with planned life events, such as a marriage, a divorce or the birth of a child. All of those events have major financial implications that require prompt attention at what often is a difficult time. A financial planner can provide a more objective, independent and informed perspective than you can when you're operating under stress.

Another valuable service a qualified financial planner can provide is to filter out all the "noise" surrounding finances today. Sure, the Internet is loaded with information for the do-it-yourselfer, but that can be just the problem: Which information is valuable, which is harmful or misleading, and do you have the time and knowledge to sort it out?

Zall, Bureaucratus columnist and a retired federal employee, is a freelance writer based in Silver Spring, Md. He specializes in taxes, investing, business and government workplace issues. He is a certified internal auditor and a registered investment adviser. He can be reached at miltzall@starpower.net.