- Some money decisions require the reinforcement of a financial planner, who can help you organize your big financial picture or focus on specific financial needs.
- You may want to consider meeting with a financial planner if you are having a baby soon, are combining finances with your partner, or have debt.
- If you decide to seek professional advice, make sure you hire a fee-only financial planner – they act as fiduciaries, requiring them to put their clients’ interests first.
- Read more Personal Finance Insider stories.
If you’re serious about building long-term wealth, you’ll probably come face-to-face with a financial planner at some point.
A good certified financial planner can put together your big financial picture and implement strategies that will help you achieve your goals, from putting your kids through college to retiring whenever you want.
7 reasons to hire a financial planner
Here are 7 reasons why you should consider hiring a financial planner.
1. You don’t know much about managing money
Managing money isn’t always simple, and it can be hard to learn quickly. Especially for busy young professionals, it can be difficult to carve out the time you need to learn how to budget and plan financially. Hiring a financial planner can help you do just that.
2. You are having a baby soon
Some of life’s most exciting milestones also happen to be the most expensive. If you’re expanding your family, there’s a good chance you’ll need to find room in your budget to accommodate increased expenses—after all, you’re feeding, housing, and clothing another human being.
A financial planner can sit down and estimate the true costs of parenthood, reorganize your cash flow, and map out any savings goals you have as a family.
3. You are balancing finances with your partner
Money is often a touchy subject in relationships, especially when your spending and saving habits are at odds. A professional can tell you which accounts to combine or keep separate and create a cohesive financial plan that meets the needs of both.
4. You will not invest on your own
Investing in the stock market is one of the most powerful tools we have for building wealth, but too many people are so paralyzed by fear of losing their money that they avoid investing all together. If this sounds like you, consider consulting a financial planner to formulate an investment strategy that meets your risk tolerance.
In fact, returns are never guaranteed when you invest in the stock market, but what you lose by sitting on the sidelines is often far greater than what you could lose if you invest wisely.
5. You need help with your retirement plan
The younger you are, the simpler your retirement strategy should be: Save as much as you can automatically through your tax-advantaged savings accounts, including your company-sponsored retirement plan, such as a 401(k) and/or a traditional plan or Roth IRA.
But as you age into your 30s and 40s, you’ll have a clearer idea of what your ideal retirement looks like, and figuring out how to get there can be a bit tricky. Financial planners are experts at retirement planning: They can assess how much you should save and where you should invest it to put you on the path to your dream retirement.
6. You are overwhelmed by debt
Anyone who has been in debt, whether from student loans or credit cards, knows that it can sometimes seem insurmountable, especially if you’re juggling retirement savings or financial goals, or live in an expensive city.
If you’re overwhelmed by your debt load, consider consulting a financial planner who can help you put together a debt payment plan that works for you and doesn’t neglect your other financial goals.
7. You have a difficult economic situation
When you run your own business or are self-employed, your financial situation is not like someone who earns a paycheck every two weeks. A financial planner may be able to provide additional help in understanding your finances and the unique requirements for managing your income.
Financial planners can help with things that can be complicated, like finding health insurance, which is purchased individually when it’s not available through an employer, and saving for retirement without access to a 401(k) plan. From managing money when income is inconsistent to planning for taxes each quarter, a professional can help you make a plan.
5 questions to ask your financial advisor
Once you’ve made your first appointment with your financial planner, some of the hard work will be over. He found the right planner for your needs and budget, researched your financial planner, and gathered everything you’ll need to bring to your first appointment.
There are a few things you should know about any financial planner you’re considering before you make an appointment. Make sure the person you’re considering is a fee-only financial planner, or someone who is compensated only for the amount you pay, not commissions on the products you sell. Also, make sure the planner is a fiduciary, someone who should have your best interests and bottom line in mind when making decisions and recommendations for you.
Once you’ve made an appointment, you may already have a list of specific things you want to know. However, there are some basic questions to ask during your first date to get the most out of your new financial planning relationship.
1. How much do you charge and what will be the total cost?
Being clear about all the costs and charges related to financial planning is essential. Get an idea of exactly how much the planner you’re considering is charging for each service they offer, and what you should expect to get in return.
For anyone hiring someone to manage investments, financial planner Malik S. Lee wants his clients to take this question one step further. “When people ask questions about cost, they usually think in terms of fees that a planner charges them directly as a client. But that only scratches the surface,” he wrote for Insider.
Often the accounts and funds that planners invest their money in also have costs. These costs could include business costs and expense ratios. Ask about account fees and, of course, the administration fee that the financial planner will charge. The management fee alone is typically 1% to 2% of your portfolio value, reports Insider’s Tanza Loudenback.
Ask the financial planner to add up all of those costs so that you are well informed and can better compare their costs with those of other planners you are considering.
2. How many clients do you have?
Having a lot of customers who already trust them might sound like a good thing, but it can spell trouble for your experience.
Zoe Financial CEO Andrés García-Amaya interviewed more than 1,300 financial planners when looking for financial planners to hire to join the company. He found that this question often revealed not only how much free time they had to offer, but also how attentive their service was.
“Many banks have advisors who have 600 or 1,000 clients for each advisor,” Garcia-Amaya previously told Insider. “Most likely that person is an amazing salesman, but as soon as he wins [your business,] you’ll never see them.”
3. What are your backup or succession plans?
Lee writes that one question her clients don’t ask enough in their first meeting is what happens if their lead planner retires, dies, or goes out of business. It’s something that, as a financial planner, he believes is critical for clients to know.
“Ask about your advisor’s business continuity plan, including their backup business locations (for events like natural disasters and pandemics), backup data plans (for data loss or breach), and succession plans detailing who is the key contact person … will be if your senior advisor is unable to serve you,” writes Lee.
Knowing these things beforehand can help relieve some stress if you ever need them. It will also help you make sure that the planner you are working with is forward thinking and has been responsible for their own planning.
4. Who is your typical customer?
This question is meant to reveal something important about your financial planner: who you feel most comfortable working with. Their answer will give you an idea of not only how well they will work with you, but also whether they have the right strengths and experience for your needs.
For example, a financial planner who works primarily with retirees might not be a good fit for someone who needs help with student loans. Asking this question will give you an idea of who they feel most comfortable working with and whether you are a good fit for their skills.
5. What are our next steps?
Towards the end of your first date, start making a game plan for your next steps. Maybe you’ve got all your questions answered, have a clear path forward, and just want help keeping track of your goals and being accountable. Or, you may have more questions that you didn’t even get to. Wherever you are at the end of the first meeting, make a plan for how you want the relationship to continue.
You can request another appointment to set a deadline for yourself. You can also decide on a routine of checking in with your financial planner and asking what is the best way to contact them if you have further questions. Decide what works best for you and how that works for your planner as well.
Make a plan that is specific and concrete: set dates for a follow-up and write down the tasks that the planner gives you. It will help make sure you get the most value for the money you’ve spent on your first financial planning appointment.
The financial takeaway
Managing your own money and financial goals can be complicated and overwhelming. So turning to a professional is a great way to make things feel more achievable and less stressful. And by working with a financial planner, you can move toward achieving your financial goals and financial freedom.