When Do You NEED a Financial Planner?
“In real life, events seem much less dramatic.” — Jessica Savitch
Last week I wrote a post about how to pick a financial planner and a few people asked how you know when you NEED a financial planner. This is a good question.
Recently, I spoke with Jennifer Hatch, President of Christopher Street Financial, a New York-based firm that provides life and wealth management for high net-worth gays and lesbians. She said that most Christopher Street clients initially come to their firm because of a specific life event.
It makes perfect sense that people seek out financial advice at certain times throughout their lives. The Financial Planning Association offers this explanation, “How do you know if you could benefit from the services of a financial planner?”
“You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. You may benefit from an objective, third-party perspective on what are often emotional, difficult decisions. And in today’s hectic world, it can be beneficial just to have a financial planning expert help to make sure you stay focused and follow through with your financial plans.”
They list specific life events that often require professional financial planning guidance:
- Planning for retirement
- Buying a home
- Saving for your child’s education
- Handling the inheritance of a large sum of money or other unexpected financial windfall
- Preparing for a marriage or divorce
- Planning for the birth or adoption of a child
- Facing a financial crisis such as a serious illness, layoff or natural disaster
- Caring for aging parents or a disabled child
- Coping financially with the death of a spouse or close family member
- Funding education
- Buying, selling or passing on a family business
- Charitable giving
My life event: I was a twenty-two-year-old college graduate who had started a business and my older sister suggested that I meet with her financial advisor. She had cosigned a small business loan for me several months earlier and perhaps wanted to ensure that I was making smart money choices.
I later figured out that her financial planner was really just a guy pushing variable life and annuities and this was called financial planning. I eventually wised up. I’m on Suze Orman’s side with this one: always buy term insurance. Even so, he introduced me to the concept of putting away a set amount every month (pay yourself first) and this was the start of my financial education and financial plan.
In my twenties, I probably could have done my own financial planning and skipped the variable life insurance premiums. But with age comes wisdom. My parents didn’t exactly teach me financial literacy and it wasn’t learned in school either. It was trial by error and as a small business owner at 22, and then a second attempt at 27, well; I made a boatload of errors and failed miserably.
But all the while I learned what it meant to sock away money and not rack up consumer debt. Over time, the advice became more sophisticated and the life events more plentiful. But back to the question of the day: Can You Do YOUR OWN Financial Planning?
The Certified Financial Planner Board of Standards suggests it’s time to make the switch from personal finance software packages, magazines and self-help books and seek help from a professional financial planner when:
- You need expertise you don’t possess in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
- You want to get a professional opinion about the financial plan you developed for yourself.
- You don’t feel you have the time to spare to do your own financial planning.
- You feel that a professional adviser could help you improve on how you are currently managing your finances.
- You know that you need to improve your current financial situation but don’t know where to start.
So is there a “best age” to start financial planning? I was twenty-two without any wherewithal or knowledge to make what little I had work for me. Financial planning back then was really just financial education. Kim Snider, host of Financial Success Coaching on Dallas-Fort Worth radio, disagrees that most people need a financial planner.
She writes on her blog, “Do you really need a financial planner? For most people, I believe the answer is no! Very few people actually need a financial planner because most of you don’t have enough money to make anything about your financial plan so complicated that it requires a planner.”
“What most people need instead are education and discipline – and a financial advisor can’t and won’t give you either one. I have no problem with the financially educated person who goes to a planner as a partner in the process, who is educated enough to contribute to the process, express what he or she wants to achieve specifically, and already has a pretty good idea of how to get there but simply wants a different perspective in case he or she hasn’t thought of something.”
What most people need is education, discipline and time. Financial planning is worthwhile at any age but we all know that time goes by quickly, so start planning now… either on your own or with the help and guidance of a professional. Albert Einstein said it best: “Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.” Plan now!