Why You Need a Financial Planner

“An idiot with a plan is better than a genius with no plan.” - T. Boone Pickens.     

The stock market has been volatile, and the headlines have been scary. And that description has become common over the last year or more.

Given the state of the U.S. economy and the U.S. stock market, and indeed, all financial markets worldwide, how confident are you that your financial plan is on track?  While books and computer programs may help you plan your future, there are several reasons why you should seriously consider seeking the advice of a qualified financial planner.

Planners know that it’s about more than just money.

At its core, financial planning is about effectively managing financial resources so that you can lead a happier, more fulfilling life today and tomorrow. One of the very first steps in a financial planning relationship is to help clients define their life goals. Do you want to start your own company, buy a second home, retire early? How do you balance competing goals, such as saving for retirement, while simultaneously putting your children through college and helping out your elderly parents?

In our financial planning, I meet with clients periodically to reassess their goals and the strategies that will help them to achieve those goals, especially as life circumstances change. No financial planning or investment software program can effectively come up with those kinds of questions — let alone provide the right answers.

Planners see the whole, not just the parts.

Many financial specialists provide valuable services to people for a specific financial need, such as buying property and casualty insurance or drafting a will. However, a comprehensive financial planner provides the overview, in order to make sure that the various parts are working in harmony. That’s why I call myself a Personal Chief Financial Officer. A company has a CFO, so should a wealthy or moderately wealthy individual, or anyone with similar desires.

As a Financial Planner, I can often see something that is missing but is needed, something which the client had never previously considered. One example was a client who had a sizeable life insurance policy in place, but should have had it owned by a Life Insurance Trust. This would save what amounted to a lot of money on estate taxes.

Another client thought she was contributing to her employer’s 401(k) plan, but she wasn’t. She had returned from a maternity leave, and somehow the paperwork never got completed. While a computer program might provide generic investment advice (not necessarily well tailored to your individual needs), a financial planner can spot the missing ingredients.

Planners motivate.

You probably know that you need a will, more insurance, a budget, a better handle on your investments and true assessment of a host of other financial issues. Perhaps you could do some of it adequately on your own. But, there’s nothing like going to a financial planner to motivate you to finally take the actions that you’ve been procrastinating about, all along.

From my experience, procrastination is a huge problem. As part of the financial planning process, I typically use an Action Plan for clients and for me, to make sure that recommendations and specific tasks are accomplished in a timely manner.

Planners provide checks and balances.

Beyond the financial expertise and the motivation to take action, the planner can provide a much-needed objective perspective. Numerous studies have shown that investors who work with financial advisors trade less often and, on the average, get better returns than those who invest on their own. Planners can filter out the financial “noise” that so often clouds financial judgment.

Planners understand that “hot” stocks become lukewarm pretty quickly.

Financial publications frequently have lists of hot financial ideas and stocks to watch. But those recommendations change all the time. Whose list should you believe? No one’s. I encourage my clients NOT to watch CNBC news, because it will just rile them up to do something that is a mere reaction to the news. Good planning is about having a road map that anticipates various events and gives you peace of mind. Turn off the TV, and enjoy your life!

Planners allay fear.

Some clients are just too fearful to invest in the stock market at all, and they have kept their money in safe investments for years. In the long run, risk and return are related. You know the saying: Nothing ventured, nothing gained. But you need to understand that you can take on risk intelligently. We are talking about investing your money, not gambling with it. A good financial planner should be able to explain risk and return to you, and to craft a strategy that is right for you. Something you will stay with in good times and bad.

Planners save time.

It takes time to develop a personalized financial program, monitor your investments, reduce risk and keep track of it all. Perhaps more time than your busy schedule may allow. Your Financial Planner offers a professional approach to your customized financial program that will not demand a lot of work on your part, and a level of knowledge and expertise that may be difficult for you to achieve on your own.

Planners know about taxes.

Like the weather, everyone complains about taxes. Planners can help you structure your investments to take advantage of legitimate tax-saving moves.

Where to find a planner?

Does everyone need a financial planner? No, certainly not. But if you have resources — savings and investments — you have choices to make. You may not have the time, inclination or even desire to do the hard work to come up with the best answer.

You can find a professional fee-only financial planner at The Garrett Planning Network (GPN) or the National Association of Personal Financial Advisors (NAPFA). If you have determined that what you are truly a Do-It-Yourselfer, or you only need a financial checkup or a second opinion, your search should probably start with GPN. If you want to delegate the work, look for a planner at NAPFA’s web site. Most NAPFA members require that you have a minimum amount of investable assets for them to manage. GPN members have no such minimum.

Disclosure: I am a member of both organizations.