4 Reasons to Hire a Financial Planner

By Megan Tutt, CFP®

There’s a reason that entrepreneurs like Steve Jobs and Mark Zuckerberg made the decision to wear the same outfit everyday – decision fatigue. It’s the idea that our brain has a limited capacity to make decisions throughout the day. These entrepreneurs knew that eliminating one decision, like what they were going to wear, would free up their decision making for more important things (like running billion dollar corporations).

All of us make decisions throughout the day from what to eat to what route to take to work along with more important decisions, like whether we are saving enough for our goals. Hiring a financial planner can free up your time and decision making for other things, prevent knee-jerk reactions that can lead to mistakes, provide guidance and bring a lot of peace of mind.

A financial planner is not for everyone. If you enjoy researching different investments, know when and why to use certain account types and understand various tax saving solutions, then a financial planner may not be right for you. On the other hand, if you find yourself overwhelmed with money decisions and want guidance, then a financial planner could be just what you need. (For related reading, see: How to Find a Financial Advisor/Planner.)

Here are four reasons why you should consider hiring a financial planner.

1. Saves Time

One-third of those saving in a 401(k) plan spend less than one hour researching the funds they choose to invest in, while 39% of those same people spent more than five hours researching vacation options, research shows. Most people could do the necessary research to manage their own investments, if they had more time or the interest to do so, but prefer to spend their time on other things. And there’s absolutely nothing wrong with that. If you choose not to spend your time on investment research, then enlisting the expertise of a financial professional could be a good option.

It’s important to find a trustworthy advisor who has your best interest in mind. Consider using the services of a fiduciary or fee-only financial advisory firm – meaning that they don’t earn any commissions or fees from the investments they recommend. Keep in mind that investments are a piece of a financial plan, but not the whole picture.

2. Proper Expertise

Beyond doing investment research, a good financial advisor and their team can look at your overall asset allocation, evaluate if you have enough life insurance, coordinate with your accountant to create a tax-saving strategy, coordinate with your estate planning attorney to ensure that your accounts and beneficiaries are in line with your estate plan, help decide when you should start receiving Social Security benefits and help you stay on track to reach your goals. Even if you feel confident in your ability to manage your investments, most people don’t have the education, skills or time to truly manage all of the intricacies of their financial lives, especially when they have more money to invest or complicating circumstances, like a second marriage or a special needs child.

A financial advisor is like a financial choreographer, bringing all the pieces together to build the right plan for you and your family. Your plan will change and evolve over time as your goals shift or change throughout your life. They also help sort out tough financial decisions. At the time you bought it, a universal life insurance policy may have been a sound investment. But now you’re older, you’re an empty nester and your mortgage is paid off. So, do you still need that policy? Is it worth the premium you’re paying for it? Is now an opportune time to do a Roth conversion and, if so, how much should you convert? Do you need long-term care insurance or is it better to self insure? These are all questions that a financial planner can help you answer so that you are confident in the decisions you make. (For related reading, see: What Do Financial Advisors Do?)

3. Emotions Kept in Check

Honestly, money can make people act crazy. It can bring on extremely emotional responses even in the most rational of us. Everyone has their own opinions and predispositions about money depending on their upbringing and experiences with it. Some experiences are positive, like when you saved and were able to purchase something you really wanted. Other experiences are negative. Maybe you watched your parents have to put off their retirement plans because they pulled out of the market after the drop in 2008 and didn’t benefit from the eight-year bull market. After an experience like that, you’re probably skeptical of the market and the risks that come with investing in it.

A financial planner can work with you to understand the history of the market and why it is usually important to stay invested even when the market is falling or down. Part of a financial planner’s job is to be a voice of reason and calm when the markets experience volatility. According to JP Morgan Asset Management, “If an investor stayed fully invested in the SP 500 from 1995 through 2014, they would’ve had a 9.85% annualized return. However, if trading resulted in them missing just the 10 best days during that same period, then those annualized returns would collapse to 6.1%.”

Another thing to remember is that the market sector that did well last year may not do well next year. A financial advisor will help you create and stick with your plan so you don’t get caught up chasing returns.

4. Peace of Mind

So, you’ve worked with a financial planner and have a financial plan to show you the path to reach your goals, now what? Continue working with the financial planner on an ongoing basis to update the plan as your life changes. Financial plans are not a one and done project. They will change as your priorities shift or goals evolve. Whether you’re a couple in your 50s or a young, single woman when you first create a plan, your life will change and so will your plan.

There will be big financial decisions to be made, such as buying a house or retiring, and your planner will be there to walk through the options with you. What changes if you a buy a $500,000 house versus a $300,000 house? Maybe you really want that big, beautiful house and can afford it, but that means putting off retirement or trimming your other living expenses.

Your financial advisor is there to guide you through each scenario to help you make an informed decision that aligns with your goals. When you know and understand your numbers, then peace of mind follows. A financial planner will be there for the next time that you need advice and answers. (For related reading, see: How to Select a Financial Advisor.)

This article was originally published on Investopedia.

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