Despite all the information you read, the experience you have and maybe the relatively simple financial situation you feel you are in, there might be times when it is worth getting the help of a professional when it comes to your personal finances.
Finding the right person to help you with your specific situation can help you in several ways:
- They can save you money
- They can save you time and energy
- They can recommend better solutions for your situation
The first advantage – save you money – is a complicated one as apart from saving you money, when you hire a professional they will also cost you money. You’ll need to pay them for their work, time and expertise at the end of the day. So before you run out to find a certified financial planner or fiduciary, it is worth considering how much they would be able to save you, how much they’d cost you and what the net difference is between the two.
Apart from saving you money, a professional financial adviser can often also save you time and mental energy. If your financial situation is relatively complex or if you have a lot of paperwork to complete, for example for your tax returns, hiring the help of a financial planner can save you considerable amounts of time and energy, meaning you can spend that on something far more enjoyable!
A third advantage of getting a professional to look at your situation is that they might simply be better at recommending and helping you find a better distribution of assets and put together a solid financial plan thanks to their extended knowledge of the financial world, pension options or legal obligations of certain agreements. Everybody has a unique situation when it comes to finances and meandering your way around the gazillion different options might be just a tad too complex for you to do. Especially if you are self-employed or work freelance, getting financial advice from an independent financial planner can help you greatly to ensure you are getting the best deal. Apart from saving you money, it is also just the peace of mind knowing that you’ve got your stuff under control, that you’ve got the best deal possible or that you are well protected against risk and / or comply with the law.
Criteria for getting the help of a professional
Should you decide to get professional help, then make sure to bear the following in mind:
- Not all financial advisers are equal. Some have your best interest at heart, others have their company’s interest at heart and will try to sell you their company’s products more than sorting out your finances in a way that will be most beneficial to you.
- Some advisers receive a commission from brokers or from companies. Again anybody on a commission will most likely not have your best interests at the top of their list, but their own!
- You should pay an adviser a flat fee which can be based on the amount of assets that they look after. Make sure you are not paying any fees for selling and buying stocks, mutual funds or other financial products.
- Check whether they adhere to a fiduciary standard: an ethical rule stating that anybody adhering to this puts their client’s interests first. If they don’t then all they are obliged to do is to recommend you products that are simply “suitable”.
- Check whether the adviser is restricted in their offer of financial products. If they have no restrictions, they are more likely to recommend you financial products that are truly in your interest. If there are certain restrictions they need to adhere to, then most likely they are constrained by their employer to only offer products that the company sells or gets a commission on.
- Remember that even a financial planner can’t predict the future, so you have no guarantee that whatever they offer you will ultimately protect you better than what you would have DIY-planned yourself.
- Don’t give your money to your planner, instead make sure your money is managed by a third-party to which you have 24/7 access.
- Lastly and most importantly: make sure you know what your planner is talking about and stay involved in the process. Only you know what your ultimate long-term plans are, how much risk you want to take and what alternatives you have if things go wrong. Don’t become a victim of your own trust in others and make sure to always discuss the options and alternative with your financial adviser before agreeing to anything.
Do you need a financial adviser?
Of course I wouldn’t have written these 100 steps / DIY guide to financial independence if I didn’t think you could manage your finances yourself. So frankly speaking I think the majority of people don’t need a financial adviser as I think it is doable and desirable to manage your finances, assets and pension yourself. If for whatever reason you feel you don’t have the time, knowledge, skills, patience or whatever else to get your finances in shape or keep them in shape, then of course getting an independent planner can greatly help you and might be desirable and will nearly always better than doing nothing, especially if your situation is relatively complex or new to you.
Step 81 – Consider Hiring a Professional – in detail:
- Write a list of areas you would consider getting help for from a professional. What specific areas of your financial life do you not fully understand or control? Think about specifics such as:
- Pension options and current pension rules;
- Investing options;
- Taxes and tax advantages;
- Your work situation (especially if you are self-employed);
- Insurance needs for your specific situation;
- Once you’ve identified the area(s) you need help with, jot down questions you have. Imagine you had to ask somebody to explain some of the specifics of the area(s) to you, what is it that you need to know? What exactly don’t you understand or need advice on?
- Look at your list and determine whether this is important and big enough to get a professional planner in on. Are there alternatives you could look at? Think about finding a book on taxes for your country, doing an online course, searching the internet etc.
- If you think it is either important enough or that there is a significant amount of money at stake, go and find an independent and certified financial planner. Refer back to the bullet points above to bear in mind and make sure to ask any possible candidates to clarify their answers on all of those points if needed and to provide you with written statements or documents to confirm their independence.
- Set meetings at regular intervals with your planner and determine what you’d like to discuss beforehand so that you keep control over the situation.
Make sure to always stay on top of what is happening to your finances however and to always understand what your planner is recommending. Even though they might save you time, money and mental energy, that is not an excuse to hand over all power and knowledge over your financial situation!
Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.