Updated on 02.02.17

Six Times You Should Hire a Financial Planner (and Three Times You Shouldn’t)

Financial planners get a bad rap, and to a large extent that’s deserved. Far too many “planners” are really just salesmen in disguise, tasked with leading their clients into high-cost products sold by the companies they work for.

But there are good financial planners out there if you know where to look, and in the right situations a financial planner can make your life easier, save you a lot of money, and help you reach your biggest personal goals sooner. After all, no matter how much information is available online, your personal situation is bound to be unique and it can be helpful to get personalized advice.

So, when does it makes sense to hire a financial planner, and when it does it make sense to go the DIY route instead? Here are a few examples.

It Makes Sense to Hire a Financial Planner When…

1. You’re Nearing or in Retirement

There are three big financial questions that retirees and near-retirees have to answer:

  1. Am I financially ready to retire?
  2. How and when should I file for Social Security?
  3. What’s the best strategy for withdrawing from my various retirement accounts in order to both meet my needs and make my money last as long as possible?

All of these questions have a big impact on your retirement lifestyle and none of them are easy to answer on your own. Each has a number of nuances and strategies that can be difficult to understand or implement without the help of a professional who knows this stuff inside and out.

Most people in this stage of life could at least benefit from a one-time consultation with a financial planner who specializes in retirement planning. Garrett Planning Network and NAPFA are two good places to look.

2. You’re Starting a Family

Getting married and having kids both introduce a lot of new financial challenges. From joining finances, to managing the new costs of having children, to thinking about life insurance, estate planning, and college savings for the first time, young families have a lot of financial responsibilities on their plate and it can be hard to balance them all.

A good financial planner will help you navigate and prioritize all of these responsibilities so that you can create a secure and enjoyable life for your family both today and in the future. The XY Planning Network would be a good place to look for a financial planner focused on people in this stage of life.

3. You’re a High Earner

If you’re a high earner, you may have the ability to save a lot of money but not know the right way to prioritize things and take advantage of the various tax breaks available to you.

A good financial planner can not only help you make those decisions and recommend tax-savings strategies, but may also be able to take over some of the implementation and management responsibilities so that you can focus your time and energy on making the money and enjoying your life.

Depending on what stage of life you’re in, the XY Planning Network, NAPFA, and the Alliance of Comprehensive Planners could all be good places to look. The ACP especially tends to have a strong focus on tax planning.

4. You’re Self-Employed

Self-employed people tend to have a different set of financial questions and opportunities available to them. There are different retirement accounts to choose from, more variable income, employees to take care of, and questions around ownership and business structure.

A financial planner who specializes in working with the self-employed will have a deep understanding of all of these issues and the planning opportunities available to you. A true expert can help you make sure you’re getting the most out of your business, allowing you to build a more successful business and keep more of the money you’re working so hard to earn.

Again, depending on your life stage, the XY Planning Network and NAPFA would be good places to look.

5. You Have a High Net Worth

High-net-worth individuals also have a unique set of financial issues. From coordinating large balances spread across different types of accounts, to advanced estate and tax planning strategies, there’s a unique skill set involved in efficiently managing an especially large amount of money.

There are a number of boutique fee-only financial planning firms dedicated to helping high-net-worth individuals, and NAPFA is probably the best place to start looking.

6. You Have a Very Specific Planning Need

Certain situations call for specialized knowledge that many people, and for that matter many professionals, don’t have.

For example, dealing with an especially large amount of student loan debt requires a strong understanding of the various repayment options and other rules that overlap each other in confusing and specific ways. Having a child with long-term special needs involves a much different set of planning strategies than most people encounter.

If you find yourself in a unique situation like this, finding a financial planner with specialized knowledge in that specific situation can help you make the right decisions.

You Don’t Need a Financial Planner If…

1. Your Budget Is Tight

I’ve worked with clients whose income was just barely enough to cover their basic expenses, and it’s never worked out for very long.

The truth is that it’s hard to fit the cost of a financial planner in an already limited budget, and that there’s only so much a planner can recommend when there isn’t much extra money available.

If this is the situation you find yourself in, it may be helpful to find a financial planner willing to consult with you on a one-time basis for a reasonable fee, just to help you sort through your priorities. But it probably isn’t worth working with someone on an ongoing basis.

2. You’re Drowning in Consumer Debt

If paying off credit card debt or other consumer debt is your biggest financial need, you’re better off working with a qualified credit counselor than a financial planner.

I would reach out to organizations like the National Foundation for Credit Counseling and Clearpoint, both of which are non-profit organizations genuinely focused on helping their customers, unlike a lot of the scammy debt management companies out there.

3. You’re a DIY’er with a Simple Situation

The truth is that most financial advice is fairly straightforward. Pay off debt. Build an emergency fund. Take advantage of your 401(k) employer match. Invest in index funds. Things like that.

If your situation is fairly simple and you enjoy learning about personal finance, there are a TON of helpful resources out there that you can take advantage of to get yourself in good shape. There’s never been a better time to be a DIY’er given the wealth of information and the quality of the tools available to you.

Is a Financial Planner Right for You?

The real value of a good financial planner is in helping you live a better life. They can help you make better financial decisions and take full advantage of the opportunities available to you. And on top of that, there’s the peace of mind that comes from knowing that your finances are on the right track.

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

Related Articles:

So what do you think? Would you consider hiring a financial planner? Why or why not? Let us know in the comments.

Loading Disqus Comments ...
Loading Facebook Comments ...

Leave a Reply

Your email address will not be published. Required fields are marked *