Do you need a financial planner? 5 points for and against hiring one

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Hiring a financial advisor is an important decision, one that you should carefully weigh before you take the plunge. This means both doing your research, and maybe even a little personal soul-searching to determine if you are in a place where you can really tap into the value that a professional can provide.

If you are uncertain about whether or not to hire a professional, consider these five points which cover some “for” and some “against” arguments.

Yes: when you don’t have the time or energy to proactively manage your financial life

If you have big ambitions for your finances then you need to be proactive. Simply reacting to things after they have happened will not be enough to achieve very big goals or to grow significant wealth. You have to go on the offensive and actively seek out ways to accomplish what you want.

But it takes a lot of time, energy and mental space… and if you’re like most high achievers, you are already spending a lot of those resources on your specific engineering area. It might sound like excelling in a career, running a successful business, or acting as your family’s COO to keep your home life running smoothly.

Whatever it is in your life, there’s probably very little room to add another full-time job – that’s exactly what financial planning and wealth management is. It is a full-time job that requires great responsibilities and commitments. If you don’t have the space to do it, it’s probably best to outsource it to a professional.

Even if you don’t already feel rushed or rushed with your current job, most people deeply appreciate paying for services (like take out dinners and housekeeping) that add more time to their days. The benefits of hiring a financial planner include knowing that an expert is holding the helm of your financial vessel, making sure things don’t fall through the cracks, cruising around hot spots, and you gets you where you need to go… without you having to. manage all alone.

No: when you are not looking for a collaborative relationship

One of the biggest benefits of working with a personal financial planner is the ability to build a long-term, trusting relationship with an expert who can provide advice, guidance, coaching, and accountability.

But that means you have to want to to be coached; you need to value a guide and appreciate that you have someone on your team dealing with the cracks and making sure nothing goes (although sometimes that means sending reminders on what actions you need to take).

A personal advisor is not just a service provider. She’s someone to love, trust, count on and listen to even when – especially when! – they need to tell you something that you might not want to hear. Not everyone wants this kind of relationship, and there is nothing wrong with that.

If you don’t necessarily see the value of a consultative approach, it might not make sense to pay for this level of service. Or, if you aren’t at a point in your life where you feel like you can build that level of relationship and trust with someone who serves as your financial advisor, you can achieve better results by taking a leadership approach. do-it-yourself. You may also appreciate simply general advice more than a complete, hyper-detailed and personalized solution; in that case, maybe a robo advisor platform is more suited to the level of support you need.

Yes: when you are not sure what is valuable information and what is just noise

The Internet is an incredible tool that makes an essentially endless amount of information available to you on demand. In theory, the Internet allows you to learn almost everything, or to learn everything you want to know.

In practice, however, you can’t really Google to find the best answers. for your situation for every question you ask yourself. This is especially true in a nuanced field like financial advice.

Yes, you can find rules of thumb and guidelines. You can get a lot of opinions and perspectives. You can study the laws, rules and facts. But you can also find yourself in a lot of trouble because of two limitations: the lack of context (or not knowing how to apply the facts to the specifics of your financial life) and the abundance of noise.

Behavioral psychologists and economists Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein define noise as “unwanted variability in professional judgments.” There is a lot of noise in financial planning because it all depends on context and completely subjective factors like your values, specific goals, interests, the compromises you are willing to make, and your non-negotiable items in life.

Noise can arise even when the information you have is factually correct… but simply misapplied to your own life. It can happen when you get two opinions from two anonymous internet forums or blogs on what to do with your money or your life.

This is where hiring a personal financial planner can provide immense value. A good planner will not start with the numbers, but by seeking to understand you as a person. This provides the context and framework around which to build a plan that brings objective facts and figures to your situation, backed by the wisdom and experience of a trained and certified professional.

If you’re not sure what’s important and what’s just noise, it might be time to hire a financial planner to help sort out the information. This is all the more true as your financial situation becomes more complex over time.

No: when the planning is “free”

The job title of “financial planner” or “financial advisor” is not something that is regulated by any official legislative body or organized group that sets specific standards or ethical guidelines. Unlike designations such as CFP® brands, there is no barrier to entry to calling yourself a planner or advisor.

This places the burden on you, as a consumer, of understanding the business model of someone who promises to give you financial advice. A red flag here is when you are considering working with someone for financial planning… and they offer to provide you with a financial plan for free.

This person is going to be compensated one way or another, so it is important to ask: how? When planning is “free” it is often tied to the sale of a product – whether it is insurance or a particular investment that will pay the seller a commission.

Some of these products and solutions have their place in a financial plan, for some people. But these are not universally good options for everyone in all situations. If you want to get financial planning advice from a real financial planner, this is the service you should be looking for and expect to pay to receive.

Yes: when the cost of mistakes starts to pile up

Most people think that “complexing” is a good thing. Compound returns are what allow you to generate more and more assets from your investments as you keep them in the market; one could say that it is aggravating, and not investing, that Warren Buffett must really thank for his massive wealth.

But composition can also work against you. The effect of a small, unnoticed mistake can worsen over time to equal a huge opportunity cost, or a missed chance to grow your money. It’s not just what you’re missing out on either; these are the mistakes you don’t even know you are making (like accidentally overfunding your Roth for years because you exceed income limits you didn’t even know existed, and you owe it to yourself. IRS a significant amount of penalties for the error).

When you first start out, the cost of mistakes is likely to be low and maybe even insignificant – to the point where just getting started is usually more important than worrying about the perfect strategy or avoiding all the wrong ones. not that you could do.

However, this does not hold true over time. The more you have, the more you have to lose – and the more you put at risk. There is no reason to put your long term financial success on the line just because you never bothered to get a second opinion or work with a professional who might have reported missed opportunities, threats. unnoticed or gaps in your risk protection.

If you’ve always done your own planning and money management, you might think you don’t need a financial planner to help you out. But everyone has blind spots, and we all have knowledge that we didn’t even know we didn’t know. There’s a reason high-performing businessmen have mentors and elite athletes have coaches … and why most wealthy people want advice from a financial advisor: They value expert advice. , experience and perspective, and they want to understand both when to act and when to hold the course.

A personal financial planner can help you do the same, and the value it brings in helping you avoid mistakes and bad choices is probably worth much more than the fees you could pay.

Founder, Beyond Your Hammock

Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow.Eric has been named one of Investopedia’s Top 100 Financial Advisors since 2017 and is a member of the 40 Under 40 class of Investment News in 2016 and the Luminaries class of Think Advisor in 2021.


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