Episode 91: Why Should I Hire A Financial Planner

Transcript

Hello and welcome to the Balanced Wealth Podcast. My name is Jarrett Topel.

On today’s podcast, I wanted to delve into a question many people ask themselves, which is “Why Do I need a financial planner?” And, while this seems like a somewhat straight forward question, there is actually a lot more to it than most people realize, so lets me try to provide some clarity here.

So, first, let’s define what a financial planner does in the first place.

A good financial planner, is a professional who helps you to define your personal financial goals, and then, helps you to navigate the financial landscape of your economic world, to makes those goals a reality. They offer guidance and follow-up on budgeting, saving, investing, tax planning, college funding, retirement strategies, and estate planning, and, if done properly, show you how all of these diverse topics can work together to create a seamless and coordinated plan of action.

And, if done well, they can do all of this, while simultaneously reducing the distracting noise of media, and well-meaning, but often clueless, friends and family, and alleviate a lot of stress along the way. Essentially, they help you create a consolidated roadmap, looking at all of the financial issues in your life, and how they work, or should work, together, to build the financial future you envision.

Now, I am not saying everyone needs a financial panner, but I am saying that most people who work with a true, holistic and knowledgeable financial planner, experience less stress and better long-term financial results.

It’s really a lot like hiring a trainer at the gym. There are some very motivated and thoughtful people out there, who can go to the gym, understand what needs to be done, and do it over and over again and achieve the goals they’ve set for themselves. However, most people seem to do significantly better with some guidance and some accountability in their lives.  And that is where the trainer, or the financial planner, can play an invaluable role.

Now, let’s explore some scenarios where hiring a financial planner could likely be beneficial. The main reason people seek the guidance of a financial planner, is to see if they’re on pace for retirement, and if not, how they can get on pace.

A qualified and knowledgeable financial planner can first help you define what you want your retirement to look like, and then, can run the numbers, factoring in Social Security, pensions, withdrawals from your retirement accounts, your brokerage accounts, your 529 plans, your tax situation, your spending, and more, and give you a clear picture of when you can afford to retire comfortably, based on your specific goals and resources.

This is a place where one-size definitely does not fit all. Many people who go it alone with retirement planning follow some overly simplistic rules of thumb, such as you need 70% of you pre-retirement income in retirement to reach your goals. Or, just as bad, your investment portfolio allocation to stocks should be your age minus 100, or some other garbage like that.

These simplistic, and honestly, dangerous, rules of thumbs and maxims are ridiculous. They assume everyone has the same goals, same spending habits, same sources of income, the same family resources, the same risk tolerance.  And, in reality, this is just not the case at all.

Most people spend more time planning their two week vacation each year, then they do planning their 30+ year retirement vacation. Please don’t be one of those people.  And, if you don’t have the time, energy, skills and confidence to do this on your own, here is a time where it is well worth paying a professional for help.

Another good reason you might want to work with a financial planner, is if you have as somewhat complex financial situation with lots of inter-locking and moving parts. A planner can help you wade through the complexities of your situation and build a comprehensive plan that takes into account all of these diverse factors.

For example, let’s say you have income from employment, income from a side business, rental properties, investment accounts, and a college savings account. A financial planner can help you optimize your savings, investing and tax situation, ensuring you’re taking advantage of all of the deductions, credits and investment opportunities that are available to you.

A third very good reason to consider working with a financial planner, is if you are anticipating significant life changes. Life events like marriage, divorce, inheritance, buying your first home, buying rental property, or having children, can dramatically impact your financial situation. A planner can help you reassess your financial goals as your life, and the world around you, inevitably change.

Just like building a house, you always want to start with blueprints. And, just like building a house, nothing ever goes perfectly according to plans, so you need a flexible and evolving blueprint that changes with your changing circumstances.

Another way a financial planner can help is through solid, unbiased, and unemotional ongoing investment guidance. If you’re new to investing, a financial planner can help demystify the process. For instance, they can explain the difference between stocks, bonds, mutual funds, and exchange traded funds, and guide you on how to create a diversified portfolio that matches your risk tolerance and financial goals. And, just as importantly, they can also help you stay disciplined during market fluctuations—reminding you and helping you not to panic sell during downturns, or get over exited during roaring bull markets.

A good financial planner will act more like a psychological coach, then a stock guru. Often, knowing what we don’t know, such as what the markets will do next, is the most important thing to know of all.

Now, let’s talk about the cost of hiring a financial planner. Planners typically charge in one of several ways.  These include commissions, hourly rates, flat fees, or a percentage of the assets they manage for you. There is no right or wrong way for an advisor to charge, but it is vitally important to understand upfront how you are being charged and what services you can expect for those dollars.

And, with a good financial planner, while there’s always going to be a cost for working together, the value you receive over the long-run should far outweigh the monetary expense.

And, while it might not be that you earn more every single year you work with an advisor, it has been shown, that over the long-run, a good financial planner adds significantly more to a family’s lifetime assets then they take away, and this doesn’t even count the psychological gains, and likely increased marital harmony, to be had from working with a professional and outsourcing a lot of the work and stress of financial management.

Simply said, many people find that the right planner can help them achieve their goals faster, more efficiently, and with much lower stress and anxiety than they could on their own. In a world where small financial decisions can significantly impact your financial future, a financial planner can be an invaluable resource and ally in your quest for financial freedom.

Whether you’re just starting your career, planning for a major life event, or nearing retirement, financial planners offer the expertise and guidance needed to navigate the complexities of your financial landscape and take the stress out of making major financial decisions on your own.

 

 

Disclosure

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Topel & DiStasi Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Topel & DiStasi Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Topel & DiStasi Wealth Management, LLC unless a client service agreement is in place.