You’re comfortable investing your money, managing your household budget, and planning for retirement. When questions arise (Lease or buy a car? Refinance my home mortgage? Do I need long-term care insurance?), you do the research and come up with sensible answers. If you face a particularly complex financial decision, you tap an informal network of friends and family members for advice.
All in all, you’re handling your money matters just fine. Why would you need a financial adviser? But you wonder if you’re missing out by doing it all yourself.
To determine whether to retain an adviser, run a cost-benefit analysis. That requires two basic pieces of information: the planner’s fee and the services you’ll get in return.
Evelyn Zohlen, a certified financial planner in Huntington Beach, Calif., says you can gather this data by scheduling a free introductory meeting with an adviser and asking, “What services do you provide and how much will it cost?” Some advisers list their fee structure on their website along with a breakdown of the services they offer and the amount of time they’ll set aside to meet with you during the year.
“Some people wonder, ‘Can I afford it?’” said Zohlen, national president of the Financial Planning Association. “They may think it’s only for the rich. But many people are surprised.”
Another surprise often relates to the planner’s role. Consumers may not realize that an adviser doesn’t just devise an investment strategy and manage a portfolio.
“For many of my clients, I’m the first adviser they’ve ever had,” said Paul Fenner, a certified financial planner in Commerce Township, Mich. “Maybe they signed on thinking I was just going to manage their investments.”
Like many advisers, he addresses a broad range of money-related needs,including developing a comprehensive saving and spending plan and guiding clients to make sound financial decisions. He cites the example of helping a 45-year-old single mother lock in a lower rate on her mortgage than she would’ve found on her own.
Examining the cost side requires a clear understanding of an adviser’s price tag. While many wealth managers charge a percentage of assets under management (often 1%), others set a monthly retainer, flat fee, or hourly rate. Some advisers let clients decide whether they want to pay a percentage of their assets for investment management or handle their own investment accounts while just paying for comprehensive financial planning that typically encompasses areas such as retirement, estate, tax and insurance planning.
Fee-only planners are compensated directly by a client in exchange for advice, plan implementation, and/or ongoing asset management. They receive no commissions from financial institutions that sell products such as mutual funds.
As a rule, ask any adviser you’re thinking of hiring, “Are you a fiduciary?” You want to hear a “yes” answer: Advisers who hold themselves to the fiduciary standard offer recommendations in their clients’ best interest.
If you’re on the fence about hiring an adviser — or simply a cheapskate — it’s possible to wade in without venturing too deep. After vetting a few finalists and investigating their background (see BrokerCheck.finra.org for any disciplinary blots on their record), select the best one and ask whether you can pay for one or two hours of their time for a consultation.
“If you start by paying a fee-only adviser for 60 or 120 minutes at maybe $250 to $300 an hour, you’ll have an idea if you need more,” Zohlen said. For instance, you may conclude from that initial meeting that it’s worth another $1,000 or more to obtain a customized financial plan that helps you map out your retirement.
Zohlen knows that do-it-yourself types have little inclination to hire a planner, and it’s certainly doable to tackle all of it on your own. She says it boils down to the value you place on your time.
“If you look under the hood, you see that it involves more than opening your statements every month,” she said. “When was the last time you looked at your homeowner insurance? And are you doing the math to know how much you need in retirement? And are you tracking all the changes in estate and tax laws? It’s a lot of work.”
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