As your financial life evolves from the day you graduate from high school or college, you may eventually ask yourself, "Should I hire a financial planner?" There are three possible answers:
- No, and I will do nothing but continue to procrastinate with the best of intentions.
- No, I'd rather take a "do-it-yourself" approach to financial planning.
- Yes, it's time to hire a financial planner.
Most people probably default to the first answer, but that obviously doesn't get the job done. Let's focus on the second two choices. [Tweet "Do you have the time and interest, knowledge and experience to really do financial planning?"]
Do-It-Yourself Financial Planning
There are a few problems with a do-it-yourself approach to financial planning. First, do you have the time and interest, knowledge and experience to really do financial planning? Most people don't have the time and, even if they do, they don't have the interest, knowledge and experience. Truthfully, this isn't brain surgery or rocket science. We don't recommend that you do your own brain surgery or try to launch a rocket, but it is possible to obtain the knowledge to do your own financial planning. However, one big factor to consider is the value of independent, third-party advice. There is a whole field of study called behavioral finance that documents that irrational behavior leads most individuals to do more harm than good in their own planning (in other words, they find a way to shoot themselves in the foot). It happens all the time. A knowledgeable, experienced financial planner's greatest value may not be a hot stock tip or brilliant advice, but simply keeping you from doing something stupid.
Getting Financial Help from a Professional
The key when hiring a financial planner is to find one who meets your needs and whose fee arrangement provides value to you. This may depend on your stage of life, your income and assets, and other personal factors. It is important to understand how your financial planner gets paid because no one works for free if they have any knowledge and experience. A fee-only financial planner charges a fully disclosed fee and does not receive any income from commissions that may cause a conflict of interest in their advice.
How to Find a Fee-Only Financial Planner
Three sources to consider in searching for a fee-only financial planner are:
Members of this network provide services on an hourly basis and may be most suitable for clients with simple situations or moderate income and assets.
Many members of this network are also CPAs.
NAPFA has strict membership standards and continuing education requirements. Many members have higher minimum fee or asset requirements.
Get yourself on the path to better financial peace of mind by hiring a financial planner who is right for you—the sooner the better!