How do you decide if it’s time to hire a financial planner?
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There are quite a few misconceptions when it comes to working with a financial planner. First, you might think that financial planners only work with the rich. Or you might expect that they only develop investment strategies for clients. However, financial planners are actually diverse in their offerings, and no, you don’t really need millions of dollars to work with one of them.
Anyone can benefit from speaking with a financial planner. In fact, getting advice from a financial planner sooner rather than later can make all the difference.
Selection asked John Loper, Director of CFP and Managing Director of Professional Practices at the CFP Board, to break down what you should know about working with a financial planner.
What can a financial planner help with?
According to Loper, certified financial planners (CFP, for short) can usually help with a variety of concerns.
“The CFP can help people who need a loan repayment strategy or need ways to generate income,” he said. “They can also help young families settle in, middle-aged individuals who need help maximizing their retirement savings and those who need help with tax and estate planning.”
But their services do not stop there. Here are some other areas in which a certified financial planner can help you:
Loper also asserts that CFPs can play a role in providing guidance in what are known as “motivating events” – events that can lead to significant changes in income or wealth. Motivating events can include, but are not limited to, a major inheritance, divorce, and death.
There are several ways to look for a financial planner. You may want to start by finding out if your employer offers financial planning services as employee benefits. This can be a good and not intimidating place to start working with a financial professional. In addition, depending on the company’s terms, the service may be free of charge through the employer.
If you really have a specific issue that you need help with, you can try searching for a financial planner with Zoe Financial, who can match you with a list of professionals who specialize in your interests.
Another option is to use PlannerSearch.org to find a professional in your state. It will give you a list of CFPs near you, and you can also filter by specialties like employee benefits, marriage, divorce, bankruptcy, home buying and more.
When should you consider talking to a financial planner?
Working with a financial planner can be a big and exciting step. Although not everyone needs an ongoing, regular relationship with a financial planner, there are some instances where it may make sense to have a professional’s input.
“I don’t know that everyone should hire a financial advisor, but everyone can benefit from one consultation beforehand to see what services may apply to them,” Lauber said. “Most planners offer free counseling. Until you actually sit down and have an initial conversation, you’re only guessing what your next step should be.”
You need a new perspective on your money
You probably already have an idea of what your next step should be, or the best way to manage the rest of your money. Or maybe money management feels really awkward and confusing. If you’re not completely confident or are wondering if there are better next steps for you to take, you might consider consulting a financial planner. Their expertise may be able to provide an option you haven’t considered yet. After taking a thorough look at your financial profile, they may be able to tell you if there is something else you should prioritize.
However, Lauber cautions that sometimes the next best step a person can take in terms of their finances is to do nothing and keep their current actions. The CFP will be able to make it clear if this is really the best thing for their clients.
A launch event that is or will happen soon
Emerging events, such as marriage, death, divorce, and receiving a large inheritance, can have a huge impact on how you manage your money — and sometimes the progress you make toward your financial goals.
When these events occur, you may consider getting a professional opinion on how the influx or shortage of your wealth will affect your next financial move. Plus, according to Loper, as you move through different stages of life, you begin to focus on different areas of your finances.
For example, you may be going through a straightforward divorce because your children are about to start college – a financial planner can help you create a plan to fund your child’s tuition fees.
You are about to retire
Of course, you can also see a financial planner if you need help getting started saving for retirement. But if you’re going to retire soon, it may be worth checking in with a professional to come up with a plan for how you’ll make your money for the rest of your life. This can feel like a heavy burden on your shoulders even if you use an automated advisor like Wealthfront or Betterment to make investments that are well suited to your risk tolerance and goals. A CFP can help you better analyze your lifestyle expenses and savings so you can determine a safe amount of money to withdraw each year.
A financial planner can also help you discover any gaps in your retirement plan. Like, maybe you’ll need to save a little extra money — which could mean having to stay in the workforce for a few extra years.
While not everyone needs an ongoing relationship with a certified financial planner, nearly everyone can benefit from counseling—and some initial input—with a CFP. Especially since there are a variety of concerns that a financial professional can help with.
Editorial note: The opinions, analyses, reviews or recommendations contained in this article are those of the editorial board alone, and have not been reviewed, approved or otherwise endorsed by any third party.