Do you really need a financial planner?

August 17, 2023 | David Edmisten, CFP®

Do you need a financial planner?

I believe most people can benefit from working with a financial planner. This is especially true for people that are close to entering retirement or that have complex financial situations. 

While there is a wealth of information on managing your finances available online, many people can benefit from the expertise, discipline and accountability that comes from working with a good financial planner. Knowledge can be helpful, but the discipline and accountability to take action when it matters is something that many people fail to do on their own.

When considering if you need a financial planner, I find there are 3 key areas to consider.

First, do you have the expertise to handle all the financial decisions on your own? If you are simply saving for retirement and your financial life is simple, you may be ok without a planner. But when you enter into more complex financial decisions, such as how to create a retirement income and keep your taxes low, having an expert who specializes in planning for those types of decisions is vital. Retirement income planning involves creating a sufficient cash flow, deciding which accounts and which assets to use for income, and navigating some complicated tax rules to find out the best way to use your savings while minimizing taxes. Working with an expert can help you avoid critical and common mistakes.

Second, do you have the time to dedicate to planning all of your financial decisions? Financial planning involves reviewing, analyzing, and managing a host of financial topics – cash flow, investments, taxes, insurance and risk management, estate planning, savings goals. While many people may consider themselves capable of handling these topics, many do not have sufficient time available to dedicate to manage all of this effectively. A financial planner can be worth the cost just for the time savings alone. Having a financial planner to take on your financial needs can free your time up to spend with loved ones, dedicate to your work, or give you valuable hours to use for the things you enjoy the most.

Third, do you have the inclination to manage your own financial planning? Even if you are educated and have time available, do you enjoy doing your own financial planning? If you are not driven and intrinsically interested in devoting yourself to financial planning, it is worth considering hiring an expert to help you.

If you’re considering hiring a financial planner, there are some important questions you should the advisor to determine if they are a good fit for your needs.

1. Do you specialize in working with a particular type of client? - This can help you determine if the planner has specific expertise in helping clients with the same type of planning you need, or if they spread themselves over a wide variety of clients and situations. For example, if you are about to enter retirement, do you want a planner who always works only with retirement transition planning? Or with someone who does retirement planning, but also helps young savers, credit issues, first time homebuying, and college savings decisions? Hiring a planner with a dedicated specialization in the area you need can help get expert advice on what’s most important to you.

2. What services do you offer, and how often will we meet? - Getting a clear understanding of what services you will receive and how frequent you will meet with your planner can help you make sure you’re getting the experience you expect. What is the planner’s process for meeting with you and what will they deliver to you? 

 Will you get a written financial plan? Will they manage your investments? What topics will they cover with you? What is the cadence and process for meeting with you as you evaluate their services and what happens if you become a client? A good financial planner should have a very clear process and be able to clearly describe their services so you can make an informed and educated decision.

3. How are you compensated? The term “financial advisor” has caused confusion for a lot of consumers, as it has been adopted by a number of professionals, including comprehensive financial planners, insurance salespeople, brokerage sales representatives, and investment advisors. When looking for a financial planner, it’s important to understand how they are paid for the services they provide. 

Do they receive sales commissions from selling you financial products? Do they receive compensation for using certain products or funds with you? Are they paid only for their advice? Is there any restriction to the solutions they can offer you? Are there any conflicts of interest to you as the consumer depending on the services they offer you? 

Getting a clear understanding of how your financial planner is paid can help you understand how closely aligned their compensation is to your needs. Many consumers prefer to work with a fee-only financial planner to help make sure they are paying for advice and not for financial products.

If you're approaching retirement and want to work with a financial planner who specializes in retirement transition planning, who has a clear process for how they work with clients, and who works as a fee-only advisor, please consider scheduling a call with us.

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About the Author:

David Edmisten, CFP®, is the Founder of Next Phase Financial Planning, LLC, a financial advisor in Prescott, AZ. Next Phase Financial planning provides retirement, investment and tax planning that helps corporate employees retire with both financial and lifestyle security.