In this era of DIY, we’ve grown accustomed to doing professional-level work on our own, whether it’s concocting “Top Chef”–worthy weeknight meals, renovating our homes or crafting up a storm.
After all, can’t you learn most things nowadays by pulling up a YouTube tutorial?
But not everything can be properly captured in a five-minute video—especially when it comes to something as important as your finances. When your money and future are at stake, there’s nothing wrong with asking for a little help.
“Some folks think because they picked an investment or two in their 401(k)s that they are qualified [to be their own adviser],” says Holly Wolf, a chief marketing officer for a bank in Chester Springs, Pennsylvania, who has worked with professional financial planners for about 20 years. “You may be able to repair your car yourself or fix your own roof, but you probably don’t have the expertise to watch your money like a hawk.”
Wolf first reached out to a planner when she realized that she and her husband were doing a good job feeding their nest egg—but not enough to help it grow. “When we started investing, we had no experience and I needed someone to guide us,” she says. “We had the savings part down, but not how to make our money work for us.”
But not everyone is as ready and willing to reach out for financial guidance: A survey by Charles Schwab found that one in three people don’t seek any outside input when it comes to managing their money.
And, in large part, that could be due to some prevalent myths and misconceptions people have about using a financial adviser. So we’re helping to bust some of those mistaken notions in the hopes that you’ll be less tepid about seeking advice for your own money goals.
“Financial planning is for anyone who wants to organize their finances, set money goals and make a plan to reach those goals,” says Ann Arceo, president of Savvy Duo Financial Planning. “While it’s true that there are some financial planners who target wealthy clients, there are a growing number who provide affordable advice—regardless of a client’s net worth or income.”
Part of this misconception may be rooted in the fact that people often lump financial advisers into the same category as other professional service providers, such as attorneys, who often charge expensive retainers.
In fact, price is one of the biggest factors to discourage people from seeking help from a financial pro. In a recent TIAA-CREF survey, 55% of respondents said that they thought good financial advice would cost more than they could afford.
The reality? “There are professionals who work with younger individuals and middle-class families on an hourly or fixed-fee basis,” says Eleanor Blayney, a consumer advocate with the CFP Board.
So if you’re unsure of whether you can afford a planner, be honest about the budget you’re working with and ask about that person’s fee structure. If the planner can’t work with you, she may be able to recommend someone who can.
“The idea of having an adviser working with you throughout various stages of your life is akin to seeing a doctor over time for annual checkups.”
You might not have a lot of different assets to manage, but it’s possible that your finances are more complex than you realize.
For example, parents with young kids usually recognize that they need to buy life insurance in order to protect their new family. But according to Arceo, what they often overlook is disability insurance, which can help cover some lost income if one or both parents are suddenly unable to work due to an unexpected illness or injury.
A financial planner could offer that type of insight, possibly bringing up options you may not have discovered on your own. Plus, even if you truly believe you have an uncomplicated money life, it never hurts to have a second opinion on your progress.
“The idea of having [an adviser] working with you throughout various stages of your life is akin to seeing a doctor over time for annual checkups,” says Erik Klumpp, founder of Chessie Advisors. “The relationship you build with your doctor helps you spot a disease in its early stages, instead of just going to a doctor after you’re in tremendous pain.”
While investing will likely play a key role in building your portfolio, a good financial planner should be able to help you with your whole money life—including budgeting, insurance, estate planning and retirement planning, among other areas.
In fact, if you find that you’re working with a financial advisor who isn’t providing enough comprehensive advice, don’t be afraid to consider someone new.
That’s what Wolf did.
“I liked [our previous financial adviser] and his performance was good, but he never showed us the big picture,” she explains. “I would ask him if we were on target to hit our retirement goals, and his answer was always ‘yes,’ but he never showed me how. [Our new planner] meets with us quarterly, and we have a very detailed plan for retirement, insurance and estate planning.”
Don’t think that after just a few meetings your work is done—in fact, you’re probably barely past the paperwork phase. “We can do a lot for you, but we can’t make you spend less and save more,” Arceo says. “You have to be willing to make the effort.”
“One benefit of seeing a financial planner is getting your affairs organized and streamlined, but that’s only the beginning,” Blayney says. A good financial planner will require your input, and want to partner with you. “After all, it is your life goals that you’re working on,” she adds.
So expect to do some of the legwork required to set your plan in motion. Your planner can’t increase your 401(k) contributions for you, change your tax withholdings, or decide whom to name as beneficiaries on your policies—those are all in your control.
But one thing a financial planner can do is provide accountability, and act as a sounding board, says Colin Drake, CFP®, founder of Drake Wealth Management. “[We can provide] behavioral support and help keep clients from shooting themselves in the foot with bad decisions.”
If you have trouble believing a planner isn’t just in it for the money, then look for one who is a fiduciary. For financial advisers, that’s sort of like taking the Hippocratic Oath.
If you’re a bit distrustful of financial advisers, we don’t blame you. The Bernie Madoffs of the world have certainly caused a lot of people to lose massive amounts of wealth.
The bad press could be partly to blame for why people are so leery about entrusting their hard-earned money to someone else. In fact, 49% of those polled in the same TIAA-CREF survey said it’s hard to know which sources of advice can be trusted.
If you have trouble believing a planner isn’t just in it for the money, then consider looking for one who’s a fiduciary. That means that the planner has met certain qualifications and is held to a standard requiring that he or she must put the client’s interests first. “As a financial planner and a fiduciary, it is my legal responsibility to act in my clients’ best interest,” explains William Davis, executive vice president of Apex Financial Advisors. “This includes, among other things, full disclosure of any conflicts of interest, as well as all sources of compensation.”
So avoid flashy sales talk and do your homework, suggests Elena Dixon, a managing associate with Jean Leonard Wealth Management. This could include interviews with the advisers to see if they have clients similar to you in age, income, circumstance and goals—as well as if they have qualifications in a certain area that might be of importance to you, such as retirement or estate planning.
On the contrary, the letters that follow a financial planner’s name can be critical. In general, look for the Certified Financial Planner™ or CFP® designation, which is a sign that the planner has demonstrated knowledge across many different financial topics.
“A CFP® professional must pass a comprehensive certification exam, which tests the ability to apply financial knowledge to real-life situations,” Blayney says, adding that the exam also covers tax planning, employee benefits, retirement, estate planning, investment management and insurance.
If your planner has other designations in addition to CFP®—like CPA (Certified Public Accountant) or CFA (Chartered Financial Analyst), who focuses more on investing—then all the better. And while a designation is no guarantee that you’ll personally click with a planner, it can be a good indication that the individual possesses the training to help you handle your whole financial life.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked-to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.
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