Ok, it's time to have a bit of fun here at my expense. Over the next couple of week's I'll be posting on a series I'm calling the Free Money Finance Top 10 Most Hated Posts/Themes. As the title implies, the series will list the top 10 (counting down from #10 to #1) posts/themes I've written on here that have found less than enthusiastic support from readers.
Today, we'll start with #10: Financial Planners
There are many people who are either financial planners or in the financial services industry who read Free Money Finance. And since I am more of a do-it-yourselfer and am often suspicious of "financial planners," you can see where a conflict exists. Almost every time I post on the subject of how many financial planners simply try to rip people off (making your money their money), I get comments and emails to the effect that I need to quit throwing out the baby with the bathwater, that there are only a few bad "planners" out there ruining it for everyone, etc.
For some highlights of what I've written on this topic, see these posts:
Just for the record, here are my thoughts on this issue:
1. I do prefer a do-it-yourself philosophy for most financial planning issues. And this is relatively easy since most good money-related practices are easy to understand and simple to implement. But I realize not everyone's into learning about personal finances (or even equipped to do so.) That said, you do need a base level of understanding even if you go with a planner -- just to be sure you know what he's talking about (and to make sure he's not leading you down a wrong path.)
2. If you do decide to go with a planner, be sure you take the right steps to find a good one. Follow the rules of hiring a good financial planner and be sure to ask him/her the correct questions prior to employment. Remember, it's your money and you need to take ownership of and responsibility for it.
I think there are a few schools of thought on this. Those who would benefit from an advisor, and those who would not. For instance, many people who spend the time reading books, magazines, and browsing personal finance websites may be armed with enough information that an advisor might not benefit a whole lot. That could mean spending unnecessary money for advice. In these instances it just might not make sense.
Then you have the individuals who simply don't have the finance knowledge required to adequately go completely on their own. This could be due to a lack of time, or simply a lack of desire to learn more. In this case, it might take a good advisor to help them get on the right track. But then it comes down to finding a good advisor. In this situation a bad choice in advisor can be just as bad if not worse than not having one at all. But for someone who doesn't have the time or knowledge to be in complete control of their financial goals, the professional guidance will generally be of benefit.
Then there is a third situation that I think gets overlooked a bit, and that is people who probably do have the knowledge and time to go about it on their own, but use an advisor to hold them accountable. I'll use myself as an example. I have been a financial planner, and currently help manage a retirement plan for a large organization. I still hold various NASD licenses, insurance licenses, etc. I am very comfortable and knowledgeable enough to handle my own finances, but I still have an advisor I can turn to for questions.
Why? Well, I need someone on the outside to occasionally talk to. A second set of eyes can often find things you overlook, or subconsciously force yourself to overlook. It is refreshing to sit down and have a second opinion on what we've done and find out if we are missing any opportunities. And when tracking goals, instead of just tracking them myself, I have someone to hold me accountable and give me a little incentive to do better if I'm falling short, or to congratulate me if I'm doing better.
Ultimately, an advisor should be like your family doctor. When you get sick, you could easily go to WebMD and find an answer, not requiring a visit to the doctor. But there are more severe cases where you really need to go to the doctor, so you do. The same thing with a financial advisor. You might not always need their help if you know how to get the answers or are knowledgeable enough, but it is good to have someone you can trust at your fingertips in the event you need the help. There is nothing worse than a financial crisis coming up and you have no idea who to turn to, or have to just pick someone out of necessity.
Of course there is also the issue on what type of advisor to see, fee-based, commission, etc. That is a whole different discussion with many topics already written.
Posted by: Jeremy | October 26, 2006 at 03:27 PM
A lesser considered angle is that cultivating a relationship with a financial advisor may be useful when we aren't able to do things ourselves. Many people run into a period of ill health or tough financial decisions and need the services of an objective person they can trust. An existing business relationship is much firmer than seeking one in the time of need.
Posted by: Duane Gran | October 26, 2006 at 04:03 PM
Not ALL posts about financial planners are hateful - there are just a few that give the rest a bad name. Don't throw the baby out with the bathwater. ;)
Posted by: Nicole | October 27, 2007 at 10:30 AM
I dont believe that FreemoneyFinance is giving good advice. The writer doesn't appear to know the difference between a financial advisor and an investment advisor.
You look for a good invest,ent advisor that outpaces the market over a long perios of time.
You look for a good financial advisor that is fee based and doesn't custody your money or make any commissions on what is recommended.
Posted by: ray | June 16, 2009 at 11:03 PM
Ray --
I wouldn't be saying someone you've read one post from isn't giving good advice, especially when you don't seem to know that it's very common (almost a rule) for financial advisors/planners to give investment advice as well.
Posted by: FMF | June 17, 2009 at 07:37 AM