Should I Hire a Financial Planner or Do It Myself?

By James I. Moore, CFP®

“Are my investments doing what they should be doing?”

“Can I afford to retire?”

“Am I paying too much in taxes?”

“What could I be doing differently to meet my financial goals?”

These are the types of questions that often lead people to ask another one:

“Should I hire a financial planner or do this all myself?”

Just as people have their own unique financial circumstances, the answer to the financial planner question will be different for different people. Before you answer the question for yourself, it is important to first understand what a good financial planner does.

What Does a Financial Planner Do?

A financial planner is much more than just an investment manager. Financial planning is an ongoing process of managing the many facets of someone’s finances so they can achieve their goals, and a financial planner will lead them through this process. The planner will proactively help their client develop a comprehensive financial plan and will assist them with implementing and monitoring that plan.

A comprehensive financial plan should cover the questions that inevitably arise in every stage of life:

Investment planning: Is my investment portfolio appropriate for my goals and risk tolerance? Does my investment advisor receive compensation from the investments they recommend? Should I be investing in stocks, bonds, mutual funds, an index fund, ETFs?

Retirement planning: Can I afford to retire? When should I start taking Social Security? How much can I spend in retirement?

Tax planning: What should I be doing to minimize my taxes? Traditional IRA or Roth IRA? What about required minimum distributions?

Estate planning: Do I need a will or a trust? How do I most effectively leave money to my heirs and make sure what I want to happen actually happens? How do I minimize estate taxes? How do I plan for potential diminished capacity later in life?

Insurance planning: Do I need insurance? How much is enough? What kind of insurance do I need—home insurance, auto insurance, life insurance, disability insurance, long-term-care insurance?

Reasons to Choose a Financial Planner

It is certainly possible to be your own financial planner and manage each of these areas yourself. However, many people find that they do not have the expertise, experience, objectivity, accountability, time, or inclination to tackle the financial planning process on their own. Here is a list of some of the main reasons why people choose to hire a financial advisor:

Expertise: Many people feel like they do not have the expertise needed to address all the areas of their finances, so they choose to get the help of a professional financial planner. We are being constantly bombarded with financial news and financial advertisements, so it can be difficult to separate the important from the unimportant and the good advice from the sales pitch. A financial planner is able to use their formal training to provide the financial advice you need, addressed to your specific situation.

Experience: A good financial planner brings the value of experience. Every stage of life brings new (and potentially frightening) situations and questions. It can be extremely helpful to receive advice from someone who has helped someone else down the same road that you are on. An experienced financial planner has seen the common mistakes and pitfalls that can derail a financial plan, and they can help guide you so you have the best chance of success.

Objectivity: Finances are personal and emotional. A financial planner can provide you with an unbiased perspective and be a sounding board for all your financial ideas or concerns.

Accountability: It is one thing to have an intellectual understanding of your investment plan, and a very different thing to watch your real-life account balance go down during a stock market decline. In times like these, it can be immensely valuable to have someone on your side to keep you on track and accountable to the course that is in your best interest.

Time: Unfortunately, a detailed, comprehensive financial plan is worthless if it is not implemented. Most people are extremely busy, and when it comes to their personal finances, they constantly find themselves saying something like “I’ve been meaning to …”  When you hire a financial planner, you are hiring someone to proactively monitor your finances and help you implement what is needed.

Inclination: Some people just might not have much of an interest in keeping up with things like investment due diligence, retirement projections, and estate and tax law changes. Whether it’s running a business or spending time with family, many people find incredible value in being able to delegate many of their financial tasks to their financial planner.

If you think that it might make sense for you to hire a financial planner, it is important to choose the right one. Unfortunately, there are no rules about who can call themselves a “financial planner” or “financial advisor,” and it can be difficult to know where you should go to receive advice in your interest. For more information on how to choose a financial advisor, read our article on the topic:

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.

James I. Moore, CFP®