Financial Planning: When It’s #DontGoThere

Let’s be real. Financial planning services are expensive. Maybe we’re flunking out of marketing class by saying this–but despite being a financial services firm, we aren’t of the opinion that financial planning is for everyone. Read on if you want to know when it’s time to hire a financial planner and when you can do without one. We’ll also cover which types of planning are worth it and which aren’t.

When is it time to hire a financial advisor?

Most people seek financial planning when they experience a life event that makes things more complicated: marriage, birth of a child, or sale of a business. There are other reason why you could hire a planner. Maybe you just feel lost and overwhelmed about money and how to use it to get what you want out of life. Or, maybe you simply do not have the time or energy to do it yourself. Estate, retirement, and tax issues aren’t always the most appealing thing to tackle in your spare time.

The purpose of financial planning is to make your life easier and better, to give you more confidence in where you are going, reduce anxiety, and open up your options. The focus is on where you are, where you want to get, and what matters to you. It is an ongoing process that changes, because as your life evolves so do your priorities.

When it’s #dontgothere

There are some advisors who will say that everyone needs financial planning. This is true in theory. But when it comes to shelling out the cash, the cost/benefit isn’t high enough to make it worth it all the time.

Some people are great at sticking to a plan. If you are able to save and spend responsibly so that your assets grow, you may not need to hire a professional. You may have the time to educate yourself about the myriad of complicated issues that can come up, for example, estate planning or tax complexities. If this is something that you find enjoyable, you may not need a financial planner.

For those who DIY, using a roboadvisor platform can be the right option for investing your portfolio assets. These work well for those who are extremely fee sensitive and who do not require one-on-one attention.

In early 2018 we plan to launch digital ACG Wealth, an online wealth investment platform.  We realized that a fully-advised solution may not work for everyone and many mass affluent individuals are simply looking for something easy to access online, on their own time, as they begin the process of accumulating wealth.

How to choose a planner

While almost every financial advisor will say that he or she is in the business of providing planning services, not every one of them will do the practice justice.

So to start with, what exactly is a comprehensive financial plan?

A legit financial plan starts with an assessment of where you are in life and evaluates your risk tolerance, short and long term goals, liquidity preferences, legal circumstances, and unique factors such as religious beliefs that limit participation in certain events. For example, some religions prohibit the use of compound interest.

The planner crafts a financial roadmap that includes a saving and spending plan as well as an investment strategy. Together these components are monitored on an annual basis and as your life evolves it is adjusted.  The financial plan should be written down and the client should receive a copy of it.

Done correctly, comprehensive financial planning can consume quite a substantial amount of time. Most fee-based advisors offer this as a complimentary service when they are appointed as an advisor for your portfolio assets. But some offer it as a stand-alone service for which they charge a flat fee.

Many advisors who operate in a commission-only environment (e.g. broker dealer or wirehouse) will offer to compose a plan as a means to convince the client of the merits of purchasing a particular product. In other words, the planning is attached for free to the pitch for a product that the planner would receive a commission for. What we believe is wrong with this scenario is that very often the planning is done with minimal investment of time on the advisor’s part and doesn’t dig down that deeply. As a result, its meaningfulness is limited. It may even be misleading. The plan serves only the purpose of supporting the case for the client buying the particular product in question.  For this reason, this type of financial planning may not be worth the time invested.

Financial PlanningJared Gold