Do I Need a Financial Advisor?

To read financial advice magazines and websites, you might think that anyone who uses a financial advisor is either dumb, or very rich. These money publications all say that with a little research and education, everyone should be able to do all financial planning and investing themselves to achieve financial independence. In the real world, however, real finance doesn’t always work that way.

Getting Stuck Doing Finance

Theoretically, getting your finances in order and investing can be a fairly simple process. However, it turns out that in reality, there are all of these places to get stuck. Once you get stuck, you lose all of your forward progress. Eventually, enough time passes and you have to start all over. As a financial advisor, I met with dozens of potential clients who walked out of my office without signing up to work with me. The vast majority never went forward with doing anything. Chances are, they met with a different advisor years later having done nothing in between.

This all occurred to me while trying to work with fellow writers to set up their own online writing businesses. No matter how straightforward the instructions seemed, folks kept getting stuck. What struck me was how, just like in personal finance, the places you get stuck aren’t the places you think you’ll get stuck. And, more importantly, they are not the places where anyone seems to provide any relevant education. (I’m going to write a book to help writers first, and then maybe I’ll do the same for finance. If you want to follow along the development of the book to help writers build an online writing business, you can follow the link.)

For example, let’s start with saving money for college. Of all the money issues out there for families, investing for a child’s higher education is one of the most common financial desires. Ironically, it is one that is rarely actually accomplished by people without a financial advisor. Let’s use an example of setting up a college savings account to see why.

Setting Up a 529 Plan

Let’s start from the beginning. One fine Saturday, you wake up and decide to start saving money for your kid’s college education. You open some magazines about finance. You read some websites with personal financial advice, and you — rightly — come to the conclusion that opening a 529 plan is the way to go.

Congratulations! Who needs an advisor, right?

Now, it’s time to open a 529 plan. So, now you….

What, exactly?

Just knowing you need a 529 plan doesn’t actually mean you CAN open a 529 plan. Do you know where to look?

A little more research and you realize that there are dozens of different 529 plans. In fact, there is at least one for each of the 50 states. Several states have more than one. Which one should you use?

Do I Need a Financial Adviser or Planner?

This is one of the places you can get stuck. You might make an educated guess and choose to use your home state’s 529 plan. Maybe you guess that you should use a 529 plan from the state where you think your child will go to college. Or, you might decide you need to do more research. The catch is that if you don’t do the research right now, you may not get back to it in time to remember all of the things you just learned. Then, you have to start over.

And, you’re stuck.

But, let’s be optimistic. Let’s say that you decide that you should use your state’s 529 plan and you are ready to forge ahead. For our example, let’s say you live in Colorado, so you want to use the Colorado 529 plan. The website, College Invest, isn’t hard to find if you do a web search. And… wait, which one is THE COLORADO 529 plan?

There are four different 529 plans. All four meet the criteria to get the right tax treatment, but there is Direct Portfolio, Scholars Choice, Smart Choice, and Stable Value Plus. Which one is right for you? Where does it say in that Money Magazine article which one to use? Unfortunately, it doesn’t.

which 529 plan is right

This is yet another place where people get stuck. Even with the online descriptions, if you aren’t already familiar with finance, it can seem like there is a “wrong” choice, and you certainly don’t want to make that.

And, you’re stuck again.

The trick to financial writing and written finance advice is that in many cases there is a “right” answer for 90 percent of the people out there. The choice is whether to make it simple for those 90 percent of people, at the risk of maybe giving one of the 10 percent the wrong idea, or whether to make it more complicated all around, but ensure that should someone come looking, you gave the right advice and covered all the bases for everyone.

In this case, two of these plans are the “normal” 529 plans that invest in the stock market via mutual fund type investments. They are the Direct Portfolio and the Scholars Choice. That 90 percent of people we were just talking about should pick one of those two. Once you know that, it is easy to get unstuck because you can only buy the Scholars Choice plan via a financial advisor or planner, whereas the Direct Portfolio can only be setup directly by the investor.

(Are you part of the 90 percent, or do you need one of those other two plans? … Maybe we’re stuck, again.)

Let’s say you’ve made it this far (whew!). Now, it’s time to actually open that 529 plan and start investing for your little one’s college fund. Find the application, download it, and fill it out…

Uh, oh. That application looks a little daunting doesn’t it? Do you want direct payroll deposit or automatic monthly investment? What’s the difference? Should you be the owner or should the student be the owner?


The point of this thought exercise is not to prove that you do or do not need an advisor to manage your 529, nor that it is or isn’t too complicated to setup a 529 plan. The point is that we’ve potentially gotten stuck several times, and we haven’t even gotten to the part where you can use all of that really great advice you’ve read. With all that research, you probably have a really good idea of what you want the investments to look like, but we aren’t even there yet, and there were several places where you could have needed some advice and guidance.

An article for all 50 states about which plan should be chosen for residents of that state might be a good place to start, but even then you have to know whether you’re part of that 90 percent or 10 percent.

Use this rule of thumb. If you get stuck before you get a 529 plan, or IRA, or whatever, opened and money going into it, then at least meet with a financial planner. It might cost you a bit more, but it will cost you less than waiting another year or two to get your 529 plan open.

About the Author

Brian is a former Certified Financial Planner (CFP) and financial advisor. Although he is no longer a financial planner, Brian tries to fill in the gaps of glossy magazine-style finance articles that are designed to rank high on search engines and get clicks and the reality of managing your own money to financial independence. In addition to Finance Gourmet, Brian is a freelance finance writer who publishes articles about money, finance, and everything in between. Brian lives in Denver, Colorado where he plots his way to a new Ferrari because he lives too far from the ocean to buy a yacht.

3 thoughts on “Do I Need a Financial Advisor?”

  1. Planning step by step with a financial advisor is the way to go to secure yourself. Unfortunately, a lot of people even though aware of the importance of a food financial plan, do not convert it into action.


Leave a Comment