When you need to hire a Financial Planner

Throughout my career I have constantly told people they need a financial plan.  Most people put up barriers, make excuses and never move forward with one.  I don’t believe everyone needs to work with a financial planner, but it’s more important that everyone has a financial plan.

What is concerning is that nearly a third of Americans surveyed by Charles Schwab[1] in 2021 have a written financial plan.  Let’s reverse it to reflect the actual problem: 67% of Americans don’t have a financial plan! 

Of the 67% who don’t have a financial plan, the survey found:

  • 42% felt they didn’t have enough money to plan.
  • 19% didn’t have enough time.
  • 22% said it seemed too complicated.

A written financial plan can increase confidence

The survey also found that 65% of people that had a written financial plan felt financially stable while only 40% of those without a plan, felt the same level of comfort. As with many aspects of life, having something to look forward to and goals to strive for gives us purpose and a point of reference to work towards. 

Like a compass, it gives us direction with a long term purpose.

Understand the different ways you go about creating a financial plan

There are three ways that you can go about developing a financial plan for yourself:

  1. Do it yourself or DIY: There is nothing wrong with this approach. In fact, there is a long-standing belief that more people should do it this way. If you have the time, resources, and most importantly, the willpower to follow through and achieve your financial goals, this may be the best avenue for you. It is the most time-consuming but also the cheapest path.
  2. Hire a financial planner for just a one-time financial plan: Individuals or families who only require a financial plan are those who are organized, can manage their debt, do not panic during market downturns, and have the willpower to implement the necessary steps to achieve their goals. These individuals or families are self-directed and capable of managing their finances independently but may benefit from expert guidance. They may also be too busy to manage their finances themselves and prefer to outsource this task to leverage their time. This model is not suitable for everyone, but it can be perfect for the sophisticated and motivated individual or family.
  3. The ongoing relationship with a financial planner.  An ongoing relationship with a financial planner could be beneficial for the person that lacks the time, knowledge, or resources to complete their own plan.  They can also help you stay motivated and focused on your goals.  Even the most intelligent and sophisticated individuals can benefit from working with a financial planner. They understand the value of time and how a financial planner can help them save time and achieve their goals. This is why many successful and wealthy people hire financial planners.

What is right for you?

When deciding whether to go it alone or hire a financial planner, ask yourself the following tough questions:

  • Are you motivated enough to stay on track with your goals and review them periodically?
  • Are you emotional when it comes to the markets, and could this lead you to make emotional decisions that could impact your future?
  • Are you willing to do the analytical work, especially as legislative and tax changes come into play on an ongoing basis?
  • Can you follow a plan and hold yourself accountable?
  • How complex is your financial life? If it is going to become more complex, will you have the time to stay on top of potential changes?

Answering these questions can help you choose the relationship that is right for you.

[1] (Charles Schwab 2021) https://content.schwab.com/web/retail/public/about-schwab/schwab_modern_wealth_survey_2021_findings.pdf

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