Sure, there are a few shade-tree mechanics out there, but most people hire someone to change their car’s oil. And people regularly hire others to paint their house or cut their hair. But when it comes to mapping out the road to retirement or figuring out how to pay for college, they go it alone.
You may think hiring a financial planner is something just for the 1-percent crowd, but there are a number of reasons regular folks might consider hiring a certified financial planner. If you’re just starting out, the plan is pretty simple: live below your means, take advantage of your company’s 401(k) program. But once you’ve accumulated some assets — and maybe a few kids — things get more complicated.
A certified financial planner can look at your cash flow, debt, insurance needs and asset allocation to help you draft a strategy to meet your goals. The investment landscape is difficult to navigate a professional who keeps current with changes in financial products, markets and tax law can help you avoid costly mistakes. Also, it may be a good idea to seek a dispassionate professional when dealing with a major life change — divorce, death of a spouse or loss of a job.
And a good financial planner will do much more than help you balance your retirement portfolio. Planners take a look at all the way money touches your life, says Sheryl Garrett, founder of The Garrett Planning Network, a nationwide network of independent financial advisors and planners who offer hourly, as-needed financial planning. That includes insurance, estate planning and even shopping for a house. “The job of a financial planner is helping individuals sort through as many ‘what ifs’ as possible,” Garrett says. “You don’t know what you don’t know.”
Getting a financial plan is more costly than getting your oil changed. And they don’t have coupons. The flat fee or hourly rate to walk away with a comprehensive financial may add up to $1,000 — or more. The cost of a plan will typically range from $500 to $2,500, Garrett says.
Some major mutual fund companies such as Vanguard will provide a financial plan for free once you have a specified amount in accounts.
The planner may spot ways for you to cut costs — perhaps you're carrying insurance you don't need, perhaps your mutual fund charges excessive management fees and you can save 1 percent a year moving to index funds. But the planner's advice may cost you money. You may be encouraged to buy more life insurance, or pony up for disability insurance. Then, should bad things happen, you're saved heartache and despair. Such savings are hard to measure.
If you’re at the stage in life where you have a six-figure retirement fund, you need to spend some money on a certified financial planner. Even if you’re good at making and saving money, that doesn’t mean you have expertise in investments, insurance, taxes or retirement planning. Hubris can derail your plans for the good life.