Is Working With a Financial Planner Worth the Cost?

William Miller |

Financial planning is not right for everyone. Some people would rather do it themselves and that is perfectly fine! The one question I hear a lot from people is, "Is it worth the cost?"

A lot of individuals think that working with a financial planner costs a lot of money. While this can be the case sometimes it is important to consider if doing it all yourself is costing you more?

There are many benefits to working with a financial planner including professional advice, avoiding emotional decisions, and freeing up your time. As you can see below each one is broken down to help you see the advantages.

Professional Advice:

Being organized is a good characteristic (especially with regards to your finances). There are many apps/services today, that allow you to sign up and then connect your financial accounts by logging in with your credentials. This will allow you to see all your accounts in one location. 

Account Consolidation Software

  • Mint (https://mint.intuit.com/)
  • Personal Capital (https://www.personalcapital.com/)
  • eMoney (https://emoneyadvisor.com/)*
  • Plaid (https://plaid.com/)

*Financial Planner Software

These apps will all allow you to connect your financial accounts and get a snapshot of your financial life. 

Once you now have all these accounts (bank accounts, investment accounts, credit cards, student loans, etc.), now what? This is where the value of working with a planner starts to show.

  • Do you have old accounts that you should consolidate?
  • Are there accounts that you should/should not have?
  • What investment accounts should you contribute to? How much should you contribute?
  • What debts should be "focused" on?

This is where people would go to google and look up their questions. Google is great for a lot of things but the information you get won’t be specific to you or your goals. 

Avoiding Emotional Decisions:

This could be under Professional Advice, but I think it deserves its own section because of how important it is. Emotions can have a dramatic effect on your financial life and lead you to make irrational decisions. Emotions, whether they’re positive or negative, and personal finance is not the best mix. 

Last year (2020) the DOW Jones dropped 37% in about a month. There are 3 paths someone could do in this situation:

  1. Buy low
  2. Do nothing
  3. Sell

The DOW Jones had a positive return in 2020 ~6.7% (if you did nothing). 

The emotional investor would have sold their investments and would have waited until the market started to stabilize or go back up. In this situation, the emotional investor probably would have had a loss in their account because they sold low and bought high.

Again emotions aren’t bad, but combing your emotions with your finances can make for a bad combination.

 

Freeing Up Your Time:

The average workweek is 40 hours; it could be more, and it could be less depending on your given profession. This does not include everything else that you have going on in your life such as: commuting to work, exercising, planning meals, spending time with your family, or responsibilities around the house. In addition to everything going on in your life, when you manage your finances you will have to:

  • Decide how to reach your goals most efficiently.
  • Figure out what estate documents you should have.
  • Seeing what assets you should hold (stocks/bonds/etfs/mutual funds, etc.)
  • Where you should hold the assets and the tax implications.
  • How much/what type of insurance you should have? 

Most people would rather do the things they enjoy and not have to spend the time reviewing their financial plan, investments, or insurance policies. Working with the right financial planner will allow you to know that all these things are taken care of and give you the time to do the things that you want to do.

 

 

 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax, legal, or investment advice and may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek advice from their accountant, financial planner, and counsel. Neither the information presented, nor any opinion expressed constitutes a representation by WM Wealth Planning as a specific recommendation to the purchase or sale of any securities/investment. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by WM Wealth Planning for educational purposes. *