You don’t have clear, detailed financial goals
Those without clear and detailed financial goals might benefit from the guidance of a professional, says Ryan Haiss, a certified financial planner (CFP) at Flynn Zito Capital Management.
“Ask yourself if you’re where you want to be financially. If not, financial goal setting is no different from joining a gym and trying to get your physical health better. It’s setting a challenge for yourself and coming up with a plan to achieve,” says James Daniel, a certified financial planner at The Advisory Firm.
As for what clear and detailed financial goals include, Daniel says building cash reserves of at least three months of expenses is one key place to start. “Then back into how soon you want to accomplish that and the necessary monthly amount to save to reach that goal,” he adds.
You don’t know if your portfolio will help achieve those goals
If you have goals, but aren’t sure if your money is working smartly towards reaching them, a pro may very well be what you need. “Do you understand risk tolerance and how to create a portfolio that is consistent with your investment goals?” asks Haiss.
Ultimately, your investment strategy should be in alignment with your goals, Daniel says. “If your goal is retirement in 20 years, you can take more risk with your money as it has a long time period,” Daniel explains. “If your goal is shorter term to build money to buy a home, your timeframe is shorter and your portfolio risk should be much lower.”
“A planner should make clear the most efficient financial path to reach your goals and put it in writing, including where your finances stand and will go should something happen to you,” says Alonso Rodriguez Segarra, a certified financial planner at Advise Financial.
You don’t fully understand what it will take to retire
“If you’re a couple contemplating retirement, ask yourself if you can you afford to retire at this time?” suggests Jim Hemphill, a certified financial planner at TGS Financial. “How much can you spend with confidence that you won’t run out of money in the future? Should you elect a pension or lump sum payment? How should you invest your assets to fund your retirement? When should you claim Social Security benefits? Can you afford to buy a second home in Florida to get away from the cold winters in Wisconsin? In this example, making a bad decision like leaving a secure job in your mid-50s with only $500,000 of assets could be a life changing mistake.”
You don’t have full confidence in your own financial decision making
“Do you need help making informed and confident decisions? If so, look for a financial adviser with real expertise, make sure you get along well and get the help you need,” says Hemphill. He recommends asking yourself things like, “Are you confident about making the decision? Are the potential consequences of making the wrong decision large enough that it’s worth paying for the advice in order to make the right decision, or simply to have confidence about the decision you make?”
You let emotion dictate too many money decisions
Bobbi Rebell, certified financial planner and founder of Financial Wellness Strategies, says to ask yourself: “Are you able to be unemotional when it comes to making investment decisions?”
Indeed, “some people will buy or sell based on emotion. This is never a good idea, and someone should have a process in place when making decisions about investing,” says Mark Humphries, a certified financial planner at Sentinel Financial Planning. An adviser can serve as the voice of reason here, so you stay aligned with your financial goals.
“Money is emotional,” says Charles H. Thomas III, a certified financial planner at Intrepid Eagle Finance. “Sometimes, that emotion can prevent you from taking action or perhaps take an action that’s not the best. If it comes to important decisions, you might know the right action but fail to implement a plan. When it comes to something like investing, this can mean missing out on growing your money over time simply because you failed to act.”
You don’t have the time, and/or financial knowhow, to deal on your own
“Think about if you want to put in the time, not just now, but going forward, to be your own expert, including the follow up and monitoring of your investments and financial planning,” says Rebell. “Are you able to keep up with changing laws regarding investments and taxes? Is someone who follows investments for a living, day in and day out, going to be able to add value to your decisions compared to you making those decisions alone?”
“The experience and knowledge of an investor are important,” says Humphries. “Deciding whether to buy or sell investments exposes an investor to complete loss. Even after someone has made the decision to buy or sell an investment, they still need to monitor the markets, industries and companies. This takes time and skill so the person’s capital can be reinvested wisely.”
You don’t know if your family will be taken care of if something happens to you
“If someone is a do-it-yourselfer and has a family, what happens when the unexpected happens? A financial adviser will provide continuity and also ensure the family’s risks are properly covered,” Humphries says.
How to find the right financial planner for you
“If you think you need an adviser, the next question is who? Is the adviser you’re considering experienced and expert in the specific topic where you need help? An adviser expert in the rules about Incentive Stock Options (ISOs) might know little about selling farmland. An adviser expert in choosing stocks or mutual funds might know little about generation-skipping trusts,” says Hemphill.
Engaging with a certified financial planner helps ensure you’re working with someone who has completed extensive education requirements, thousands of hours of work-related experience and is a fiduciary, meaning they’re legally bound to put your best interests ahead of their own.
There are other designations of qualified planners as well including chartered financial analysts (CFAs) and chartered financial consultants (ChFCs) among others. To find qualified planners, visit the National Association of Personal Financial Advisors (NAPFA), Fee-Only Network or the CFP Board’s Let’s Make a Plan site. You can also use this free tool to get matched with a fiduciary financial adviser who may meet your needs.
As for what you can expect to pay a professional, fees vary greatly depending on the type of services provided and where you’re located. Many advisers charge an assets under management (AUM) fee, but a growing number of advisers work under flat-fee or hourly rates. Before hiring an adviser, ask them these 8 questions.
Bri Conn, an investment adviser representative at Childfree Wealth, says you may want to do “to someone who is advice-only and fee-only. Simply put, they’re only paid by you for their time and receive no commission or referral compensation.”