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7 Reasons Why You Haven’t Hired a Financial Planner – And Why They’re All Wrong

Many Americans choose to go it alone with their finances instead of hiring a certified expert. Hiring a financial planner is not yet part of our mainstream culture. Yet, if we are willing to pay a mechanic to change our car’s oil or a plumber to fix a leaky sink – even though we could accomplish both tasks ourselves – why wouldn’t we want to employ an expert when it comes to our money?

Here are seven common reasons why many choose not to hire a financial planner.

  • “I don’t have money to invest.” That’s what my former co-worker told me. The truth is, she is contributing to her 401(k), and thus she has money she is investing. Without a financial planner, she will just choose her 401(k) investment funds randomly or through the help of another co-worker who is winging it. Is this a winning strategy?

 

  • “My situation is quite simple.” This is what my friend told me the other day. She has a bank account, one old 401(k) with TIAA, and an independent contractor job. For starters, a financial planner can help her with the following:
    1. Invest her old 401(k) better. This may entail moving it out of a higher-fee fund to a lower-fee fund. This could mean thousands in higher gains.
    2. Recommend a higher-yielding bank savings account.
    3. Teach her how to budget smartly, to align her money with her values.
    4. Lower her tax bill by contributing to a SEP IRA.

 

  • “I’m ashamed to reveal my financial situation.” You’re not alone. Everyone makes mistakes, including me. When I was studying for my CFA exam, I learned about stock options, and how one can rapidly make money. I soon realized it was also a rapid way to lose money. Find a firm that has a culture of meeting clients where they are. They exist.

 

  • My 401(k) and IRAs are doing fine, thank you.” But perhaps a financial planner who has a strong background on investing can help you do better. A study of the investment returns of 425,000 individuals revealed that the median annual return of those who got professional help was nearly three percentage points higher, even after fees.

  • “I have a lot of things going on.” I get it. Our jobs are demanding. We have social obligations. But money is inextricably linked to our daily lives. We make financial decisions on a regular basis. When you choose a beverage to drink, you’re making a personal finance decision. You make decisions regarding your weekend plans, health insurance, 401(k), bank accounts, credit cards, vacation, apartment, job, engagement, children, parents…the list is endless. If you work with a financial planner, s/he can help you make more informed decisions that will hopefully free up space in your life.

 

  • “I don’t trust a financial advisor.” I don’t blame you. Financial advisers consistently get the lowest level of trust in consumer surveys – the same level as a car salesman. This is due to the fact that close to 90% of financial advisors are actually salespeople. They legally do not have to do what’s in your best interest. This is why it is so important to find a fee-only financial planner. The organization NAPFA has highly trained professionals who are committed to working in the best interests of those they serve. Look for a CFP® professional. They have completed extensive training and experience requirements and are held to rigorous ethical standards.

 

  • “It’s too expensive.” But have you asked yourself:

What does it cost to NOT have a financial planner?

If you make the following mistakes, it can be more costly.

Oops Potential Cost
Didn’t take care of your credit score Thousands of dollars in higher interest payments in your mortgage & other loans.
No budget Money may not be aligned with values & priorities. Life goals are harder to achieve.
Minimal contribution to 401(k) Lost opportunity to build wealth. Less flexibility to retire early.
No emergency fund Less flexibility to change jobs. Vulnerable to health emergencies & unexpected car/house repairs.
Randomly chose 401(k) funds Thousands of dollars in lost investment gains.
Didn’t contribute to Roth IRA Thousands of dollars in taxes to be paid.
Left old 401(k) in high-fee mutual fund Thousands of dollars in higher fee payments.
Failed to take steps to protect your identity Lost productivity, higher stress to fix identity.

So what do you think? If you have a financial planner, what was your main motivation for seeking one? If you don’t have one yet, what prevents you from seeking one?

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Alvin Carlos, CFA, CFP®

About Alvin Carlos, CFA, CFP®

Alvin Carlos, CFA, CFP® is passionate about helping middle class professionals make smarter financial decisions. He is the CEO of District Capital Management, a financial planning and investment management firm for the everyday people. Alvin is a CERTIFIED FINANCIAL PLANNER™ practitioner and has a Masters degree in International Relations from SAIS-Johns Hopkins. In his spare time, Alvin enjoys swing dancing and Ultimate Frisbee. He also volunteers for Catholic Charities’ new Financial Stability Network, which helps low-income folks with their finances.

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