Do You Need a Financial Planner? When to Hire a Professional

When you’re dealing with complicated finances or trying to build your wealth, there comes a time when you might benefit from hiring a professional to assist you. These financial professionals are typically called financial planners, though you may hear the term “financial advisor” also used almost interchangeably.

Here’s a look at the differences between financial planners and financial advisors, and how to decide when it’s time to hire a professional to help with your finances. You may not need a financial planner right now, but eventually, having someone to help you create a long-term financial plan may be beneficial.

Photo by Avel Chuklanov on Unsplash

In many parts of the finance industry, the terms “financial planner” and “financial advisor” are used almost interchangeably to describe a financial professional who assists you with managing your finances and planning for your future. There are differences, however, between these two types of professionals.

“Financial advisor” is a much broader term than financial planner. A financial advisor is any type of professional assisting someone with managing money, from investments and real estate to tax planning or large purchases. Financial advisors may specialize in a certain field, like investment management, retirement planning, or estate planning, and may have certifications related to these functions.

Financial planners, on the other hand, take a more holistic, comprehensive approach to helping their clients meet long-term financial goals. Rather than simply focusing on a particular area, financial planners look at a client’s entire financial background and goals to create a plan that increases their wealth. They also provide ongoing guidance and help clients execute these plans over time. They can assist with investment portfolio management and create an integrated tax strategy that takes into account the entire breadth of the client’s finances.

If you’re hiring a financial planner, look for one with the Certified Financial Planner (CFP) designation. CFPs must complete coursework and pass a rigorous examination, and they have a fiduciary duty to act in their client’s best interests rather than their own. They must also adhere to the CFP Board’s code of ethics. This prevents unethical behavior, like an advisor who recommends an investment product that won’t further your goals, but will increase his commission.

In reality, you could hire a financial planner at any point in your life, but it makes more sense for certain people. If you’re still living paycheck to paycheck or are carrying a substantial amount of debt, it may not be time to bring a financial planner on board yet.

In this circumstance, you would still want to plan for your financial future, but your plan would be slightly more short term, focused on paying down debt or amassing some savings. Financial planners are most useful when you’ve reached a point where you’ve accumulated some wealth — you certainly don’t need to be rich to hire a CFP, but you need some money to work with.

Photo by Peter Oslanec on Unsplash

Advice from a financial planner is particularly useful at certain milestones in life. For example, if you have just received a large inheritance, started a new job that pays significantly more, or if you’re experiencing an important life event (like a divorce, a new baby, or selling your business), then hiring a financial planner can be an excellent idea.

However, you don’t need to wait until a big life event to decide to hire a financial planner. Perhaps you have some wealth set aside, but you’ve decided it’s time to implement a plan to make the most out of that money. In this case, it’s your choice to hire a financial planner, but doing so could make a big difference in your financial future.

Another time when you might consider hiring a financial planner is when you’re close to retirement. Financial planners can help you determine if you have enough money to retire, and how to reach that point if you’re not there yet.

The years before you reach retirement age can be one of the best times to consult a financial planner. They can look at your finances and retirement options as they are now, and help you create a plan that will allow you to retire the way you want to and still have enough money to help your family, take a vacation, or achieve any other retirement goals.

You may not be in a place right now where it makes sense to hire a financial planner — but there will likely come a time when you’d benefit from the expert advice of such a professional. Financial planners help you grow your wealth, and they can also connect you with other professionals like tax experts, life insurance advisors, accountants, and attorneys. Many financial planners work closely with these other professionals and can help you build a team for all your financial and professional services needs.

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.

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