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  • Jeff Burke

Do You Need a Financial Planner?

Updated: Jan 28, 2020

Do You Need a Financial Planner?

I am taking a small break from my Financial Planning 101 series to delve into some topics related to the business of the financial planning industry. There are a large number of articles published on this very topic and a few recently that can be found here and here discussing the reasons why you don’t need one.

Now, one of my rules of thumb is to take with a grain of salt the response when asking someone who provides or sells a product or service if you need that product or service. Why? Because why wouldn’t they say you need what they are selling? They make money from selling those products or services. And, yet, here I am, a financial planner, offering advice on whether or not you should have a financial planner. And, surprise, I am going to tell you that most people could benefit from one. While I truly believe that to be true I will also discuss the services available and show why there are of value.

Seeing as my firm, 7th Street Financial, provides comprehensive financial planning I will focus on the various areas of financial planning and discuss when you might be in need of each of these services.

Let’s start with primary reasons people seek out a financial planner.

1. Investment Management

Many people might turn to a financial planner for the first time for this purpose. For myself, it was when I left a job and had a 401k to rollover to an IRA that then needed to be managed. Others may not have access to a retirement plan at work and need help managing investments for retirement and others still might have additional income they want to invest above what they have going into their employer retirement plans.

A planner will analyze your investments and make sure your portfolio has the appropriate level of risk for you, that it is properly allocated between different asset classes and evaluate the individual selections within the portfolio to maximize return for a given level of risk.

2. Retirement Planning

As well, many people will turn to a financial planner as they near retirement to make sure they are prepared. This can include a review of the level of savings needed to have the client’s desired lifestyle, Social Security benefits, savings withdrawl strategies and Medicare amongst many factors to consider. Putting all of this together provides a detailed game plan for how a client’s finances will look in retirement.

3. Tax Planning

Financial Planners work with clients to ensure that their investments are handled in a tax efficient manner and look to find ways to minimize taxes in both working years and retirement. This can be done by knowing when and how much to put into different types of investment accounts, how to manage withdrawls from retirement savings and if ROTH conversions make sense for you to name just a few.

In addition there are a number of other areas where a financial planner can provide guidance that are often overlooked as people tend to seek out specialists in these areas instead of getting one stop advice from a financial planner.

4. Insurance Planning

Almost every adult has a need for insurance. Health insurance coverage is critical, life insurance is a must for those with spouses and/or children, home and auto insurance are required if an owner, disability insurance is critical if working to protect your income and umbrella insurance is a valuable to protect your assets in case of a liability.

The question that people need answered is when they need the different types of coverage and how much they need. A financial planner can help determine the proper amounts of coverage that are appropriate for your situation along with the proper types of policies.

5. Education planning

Knowing how much to set aside for college can be a tricky exercise for most people and add in knowing the best type of accounts to use for savings and professional help can be of great assistance. A planner can advise on a plan for accumulating savings, how to invest the savings, how to manage the payments once school begins and take advantage of available tax breaks.

6. Estate Planning

While most estate planning documents need to be drawn up a lawyer, a financial planner can review your situation and recommend the needed documents and strategy for your estate documents including wills, trusts, medical directives and powers of attorneys as well as plans for charitable giving. They can also go over how your key assets are titled and review named beneficiaries to ensure your assets will be passed long as you had hoped.

Now think about the majority of adults and how many of them have some degree of investments, how many want to have a nice retirement, have insurance needs or would like to provide assistance putting a child through college? The answer is most adults have needs in one or more of these areas and could use the help of a financial planner.

That being said there are legitimate reasons to be skeptical about needing a financial planner and I will address those in several upcoming blogs. But the primary reason for getting one is to make sure you don’t make a mistake that can cost you thousands or hundreds of thousands of dollars because you try and go it alone and weren’t aware of the options available to you. This might involve making sure your portfolio is properly allocated, that you are properly using the various taxation traits of investment accounts or that when you are properly covered in the event of an unfortunate event. By helping to increase your financial position in these cases you will have more money in the end to enjoy the fun things you are hoping to accomplish in your life.

Thanks for reading and stay tuned for the next blog post in this series about the reasons why you don’t need a financial planner.

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