Good leaders know when to delegate, and when to seek expert opinions. So as the leader of your personal finances, you shouldn’t be afraid to consult a financial planner–when appropriate.
Here are ten scenarios to help you determine when it makes sense to hire a professional to provide investment and financial advice. Planners typically charge a flat fee of $100 to $500 an hour for their advice. If they also manage your money, they’ll typically charge you a percentage of assets, around 1% to 2%, less for larger accounts.
A planner’s job is to solve tax or investment problems, help you deal with your estate and coach you toward long-term goals. If you simply want to get more organized, download a software program such as Quicken. Or try an online money tracking Web site such as Mint.com.
A planner may not be able to help you achieve a 13% annualized return, which is what it would take to reach your objective without any additional savings. That’s awfully ambitious. But good, ethical planners will help you to set realistic expectations (they can’t guarantee results). You’ll fill out a questionnaire before your first meeting, which should be free and informal. Part of the survey will discuss your investment style and your expectations.
Perhaps all you need is a sit down with your father’s favorite to assert your individual wishes and customize your portfolio. But if you are looking for a fresh perspective, you may find a consultation with a new adviser worthwhile, even at a cost of $500 to $1,000. You can then decide which adviser is right for you.
At least not as a first step. Save the $1,000 you might have spent on a planner to hear advice you probably know already: Leaving your money on the sidelines is the surest way to lose in the long run. Arrange for a fixed sum to go into your retirement plan every month. Your HR department can help you take care of this in no time at all. If you feel clueless about HOW to invest that money, however, you may find it helpful to get advice — and, perhaps, some reassurance — form a planner.
A good planner can improve a haphazard portfolio by analyzing its risks and returns, its redundancies and unnecessary investments, and the fees and taxes you’re paying. You can pay for ongoing service, or you might get a one-time-only “X-ray,” or portfolio analysis, for a few hundred dollars.
Just be sure to seek someone who specializes in “holistic” financial planning or “life planning.” You don’t want someone who only knows bonds and tax planning but nothing about what you want to do.
Planners are not economists, and they rarely endorse unbalanced investment strategies. Be honest with yourself: If you want to move most of your assets into real estate or other hard assets, you’ll probably need more advice than any financial planner can provide. Just remember, you can lose money in this stuff just as easily as you can in stocks and bonds.
Planners will tell you that many of the situations they deal with result from family problems, whether it’s divorce, failure of a family-owned business, jealous relatives or a bunch of other things. To set up appropriate trusts or investment accounts and keep the peace, you need guidance — a sensitive adviser or team of advisers will be worth the money.
Learn some lessons — about you, about investing — on your own first. You can find free guidance from your employer, your 401(k) plan sponsor, perhaps a local investors’ organization, or trusted media source such as Kiplinger’s Personal Finance magazine and Kiplinger.com. Still feeling unsure? A consultation with a good planner could provide the sounding board and encouragement you need.
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