Ask any financial advisor, and they’ll tell you that everyone (with money, at least) needs a financial planner or advisor. Ask any do it yourself financial planning type and they’ll tell you that no one need a financial advisor or planner. The answer, of course, is much more complicated than that. However, there are some people who are very likely to actually need a financial advisor.
Big Money Quickly
People who suddenly come into large amounts of money almost always benefit from a professional financial advisor. Unlike those who slowly grow into their fortunes, people who suddenly acquire wealth don’t have time to slowly build up experience with bigger finances. Consider someone who takes 5 years to grow into a $1 million net worth. That first year, they realize there are some tax things they need to consider. During the second year they find out other things, that maybe only really impact people with more than $500,000, and so on.
But, when the money comes all at once, there is no time to build up that experience, and, unfortunately, many financial mistakes are irreversible. People who sell their company, or whose stock options finally come in, or otherwise come into a lot of money fast, should at least consult with a financial advisor, even if it’s only to figure out what questions they should be asking.
Complicated Family Life
Sometimes, the complications involve tricky family or social situations. For example, taking care of an aging parent, while trying to plan for college for children, perhaps with different biological parents, and so on can be complicated. In a lot of these cases the need for a planner is less about investing and planning, and more about making either/or decisions. For example, is money better invested into a 529 plan, a Roth IRA, or long-term disability insurance if the goals are to take care of dad, sons and daughters and oneself? What are the implications for things like financial aid, medicare eligibility, and more? Those things move quickly away from the standard advice you see in the average financial magazine or financial advice book.
Major Life Events
Sticking 10 percent of your income into a well-diversified, annually re-balanced, 401k portfolio is the kind of thing a financially savvy person can do all themselves, and is likely to lead to a solid retirement. But, what about a job change, or retirement itself? What about a marriage (second marriage?), or another child?
These things can change both the long-term goals, and allocation of current assets very quickly. Reviewing them with a Certified Financial Planner may make sense to ensure there are no complications.
Procrastinators and Paperwork Avoiders
Many of my financially planning clients walked away without signing up after the first meeting. They thought they knew what to do. And, very often, they did.
The problem, was that they didn’t actually end up DOING what they knew they needed to do.
Knowing you need to make the maximum IRA contribution to a Roth IRA every year is a lot different than choosing a brokerage, getting the paperwork, filling out the paperwork, sending in the automatic ACH form, with a blank check, and…
Well, you get the idea.
Often, these people would come back months, or even years later. The only difference is that the second time, they knew that knowing and doing are different things. With an advisor, there is always someone to do all the paperwork for you and then call and say, come in for 5 minutes and sign these papers. For the busy, or afraid, this one service can be a life saver.
Who NEEDS a Financial Planner?
The reality is that some people really need a financial planner, and others don’t. Increasing amounts of money and complexity increase the need. In the end, if you make a plan and actually execute it, then you are way ahead of most people. If, on the other hand, something goes wrong on the way, then maybe you do need a financial professional helping you our around the tricky corners.