Do I Need a Financial Planner?

Most people can learn to handle some of their own financial planning. But some money decisions should be made with the help of a professional. Use these guidelines to decide when you should call in a financial planner.

by Gary Foreman

Gary,
My husband is an engineer and I am a CPA (not in public practice), so we are relatively savvy when it comes to financial matters. Does everyone need a financial planner?

We’re not millionaires, but we have amounts in IRA accounts, investment accounts and 401k accounts. It just seems like the accounts are scattered everywhere and should be more centralized. Can you help us?
Janice in Tulsa, OK

Janice asks a good question. Managing our financial affairs is getting more complicated even if you don’t have a lot of money.

The truth is that everyone needs someone to manage their financial affairs. But, it’s equally true that many people can be that manager for some or all of their affairs.

Let’s see if we can’t create some guidelines to help you decide when you need to call in a financial planner.

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What Does a Financial Planner Do?

The first thing is to understand what a financial planner does. It is not the same as a stockbroker or investment adviser. A planner will help you define your goal and then work with you to assemble a plan to achieve that goal.

For instance, your goal might be retirement. The planner would want to know at what age you’d like to retire and what you’d like to do during retirement. From there, he’d determine how much money it would take to afford that lifestyle and then create a strategy to accumulate enough money.

In some cases, the planner will need to call in other experts. Many planners started out in specific fields (accounting, law, investments, insurance) and will handle transactions in their field, but outside of their expertise, they’ll need to call in other professionals.

A financial plan can be for a specific goal, like a college education for your kids. Or it can be for all of the financial goals throughout your life.

What Does DIY Financial Planning Look Like?

Now that we know what a planner does, let’s see if we can determine whether Janice can do it. Like many do-it-yourself projects, you must answer some questions before deciding whether to tackle the job.

The first question: will you know when a plan is required? Needing to plan and not doing one could cause serious problems later. Some appropriate times might be marriage, birth of children, opening and closing a business, and retirement. You’ll also want to do some preplanning for retirement and for your estate.

Next question: can you define your goal accurately? Putting Junior through college isn’t specific enough. You’ll need to consider public vs. private schools. Will Junior work? Live on or off campus? Knowing the right questions to ask is essential to defining your goal.

Once you have a goal, it’s time to create a strategy for attaining it. Our college example would require calculating how much money would be required. You’ll need to estimate how much prices will change in the intervening years. The plan will use savings and investment tools. It also could include tax strategies and possibly even legal documents.

Since most of us have pretty common goals, there are many resources to help Janice. She’ll find books and websites dedicated to helping the do-it-yourselfer. Most of the information is understandable, but it often requires study. (See Successfully Setting and Achieving Financial Goals.)

When Should You Consider DIY Financial Planning?

Now that Janice understands the goal and has some feel for the plan and what resources are available, she can consider whether she can do the job herself.

The first thing that might disqualify her from a do-it-yourself plan is competence. Some legal documents, investment vehicles or tax strategies really require training to understand and complete successfully.

The second question for Janice to consider is whether she has the time and temperament to do the job. It takes time to complete a financial plan. There are a lot of 50-year-olds who have been meaning to put a retirement plan together for over 20 years and still haven’t gotten it done.

Janice might also find that she has the wrong temperament for the job. You’ll need to enjoy researching and math to complete many portions of a financial plan.

Ultimately, no one is qualified to do every step of the different financial plans you’ll need in your life. Even professional planners refer clients to specialists when it’s appropriate.

In fact, that might be one reason to use a planner. They will have a network of professionals. The planner will know their strengths and weaknesses. And should be able to recommend a specialist when needed.

For most people, financial planning combines do-it-yourself and call-the-professional. Some planners are unwilling to work on anything short of a complete financial plan encompassing everything. But, most are comfortable helping clients complete the portions they can’t do themselves.

Janice may also find that something that she thought she could do turns out to be beyond her capabilities. That’s alright as long as she realizes that soon and goes to get the proper help while there’s still time to meet her goals.

Ultimately, only Janice can decide how much help she needs in managing her finances. But, having some idea of what the task is should make it easier for her to come to a good decision.