Are Financial Planners Worth It?

Financial PlannerHave you ever considered employing the services of a financial planner? If yes, then you’ve probably asked yourself the question: “are financial planners worth it?” or, more aptly, “are financial planners worth the cost?“. The answer likely depends on your unique situation. Let’s check out some reasons for and against retaining a financial planner. You can then decide if a financial planner would be a good fit to help guide you along.

Financial Planners: Yes, You Should

  • Too Busy – A majority of us are constantly strapped for time. Trying to balance career, family, friends, errands, etc. doesn’t leave time for much else it often seems. Staying on top of your retirement planning and other investments might get neglected when life is pulling you every which way. You can benefit from a financial planner by letting them do a portion of the legwork which will ultimately save you time.
  • Lots of Money to Invest – If you have gobs of money sitting around then a financial planner might be what the doctor ordered to make sure you’re achieving your goals. A financial planner can ensure your large sums of money are properly diversified and invested appropriately in order to hopefully get the best return.
  • A Combination of Too Busy and Lots of Money – If you are well-endowed (financially speaking – get your mind out of the gutter!) and a super busy person (a combination of the first two points above), then all the more reason to entertain the idea of using a financial planner. Someone in this category might be a wealthy business owner who spends long hours running and focusing on his company. Essentially “outsourcing” your financial planning could be wise.
  • Completely Overwhelmed & Uneducated – Another reason a financial planner could be of benefit is if you just don’t know anything about the world of personal finance. If the thought of stocks, bonds, mutual funds, Roth IRAs, 401(k)’s, etc. make your head spin and overwhelm you, don’t be ashamed. A financial planner can help guide you along and even teach you some of the basics through your discussions or by literature they provide to you.
  • Trying to do more Complicated Investments – You may want to consider using a financial planner if you are attempting to do more complex investments. If this is the case, be sure the financial planner is competent and experienced enough to be able to handle the task at hand. A lawyer or accountant might also be needed if the investment opportunity is really complicated (especially for tax planning purposes).

Financial Planners: No, Please Refrain

  • Fees – Financial planners come with a cost. They will charge you fees for their services. While the fee structures will vary between different financial planners, avoiding the fees is a major reason not to use a financial planner. The money you would have spent on fees can be used to invest elsewhere.
  • Educate Yourself – These days, you can find information on just about any investment alternative out there. All you have to do is a quick Google search and you’ll discover an abundance of resources. Taking the time to teach yourself means you have less need for a financial planner.
  • Investment Goals – What are your investment goals? If they’re simple objectives, then you shouldn’t need a financial planner. For example, let’s say all you want to do is save for retirement in a Roth IRA.  A simple approach would be to funnel your money into a low cost index fund within that Roth IRA. Just set up automatic monthly contributions and then be on your merry way – no financial planner needed!
  • More Satisfying Yourself – Taking the initiative to run your own financial planning can be gratifying. Doing the necessary research, planning, monitoring, re-assessment, and so on will provide an intrinsic reward that you wouldn’t achieve through a financial planner.

The Verdict: Are Financial Planners Worth it?

As you can see, the decision to utilize a financial planner really depends on your situation. In the end, it boils down to whether or not the costs you’ll incur for a financial planner are deemed worth the services provided. Remember, there’s no guarantee of a better return on your investments by using a financial planner. In fact, technically there’s no guarantee for any return at all! You will need to weigh the pros and cons and decide if a financial planner is right for you.

What About Me?

In case you are curious, I’ve never used a financial planner and I don’t have any plans to ever do so. I feel I have a solid grasp on what I need to do to achieve my financial goals. If I’m ever curious about an investment option or strategy, I have confidence in my ability to attain solid understanding via my own research (that is, educate myself). Paying someone else to provide advice on where I should invest does not seem worth the cost I’d have to pay. Keep in mind, this is just my personal circumstance (I have an MBA after all!). The only way I could see myself using a financial planner in the future is if I somehow strike it wildly rich and have so much money and too little time to manage it all 🙂

Do you or have you used a financial planner? If yes, what are your experiences? If you haven’t used a financial planner previously, would you ever consider employing one?

Image courtesy of satomodel at Flickr.

22 Responses to Are Financial Planners Worth It?

  1. MonicaOnMoney September 12, 2013 at 8:00 am #

    This is a really great question, thanks for breaking it down in more detail!

    I’ve never used a financial advisor but have considered it numerous times. A misconception that I had is that we need to have A LOT OF MONEY in order to get a financial advisor but that simply isn’t true. I personally think I’d benefit from a financial advisor to get started with investing and to learn how without risking my money blindly.

    However, the fees are part of what’s keeping me from using one. And I want to wait until I’m debt free before I start looking at paying fees for someone to manage my moeny.
    MonicaOnMoney recently posted…50 Ways To Become Debt FreeMy Profile

    • Mr. Utopia September 14, 2013 at 1:55 pm #

      There are financial planners for “all shapes and sizes.” The range of services offered likely cater to the target clientele though. If you’re interested in scoping things out, your local bank or credit union might have a financial planner available (the local credit union I use seemingly has one in every branch).

  2. Andrew@LivingRichCheaply September 12, 2013 at 10:07 am #

    I don’t think a financial advisor is necessary unless you have a lot of money. If someone really feels the need to speak with an advisor, then I think they should go to one who is paid hourly rather than someone who is commissioned and might want to push high priced funds. I think think a low cost target or balance fund does the job without the need for a financial advisor. I think with some research and reading, people will realized that investing doesn’t have to be that complicated.
    Andrew@LivingRichCheaply recently posted…Are you Lured in by Sales?My Profile

    • Mr. Utopia September 14, 2013 at 2:16 pm #

      You make a good point about hourly vs. commissioned financial planners. Those paid by commission might not have your best interests fully at heart. I agree with your statement “I think with some research and reading, people will realized that investing doesn’t have to be that complicated.” Some people really just shy away and get overwhelmed though. For folks like that, a financial planner may be of benefit (better than not investing at all, right?).

  3. Pretired Nick September 12, 2013 at 12:16 pm #

    They are definitely parasites to some extent, although if you need help, you need it. It’s a tough one. I’ve learned from some I’ve used, but I doubt in the end they were “worth it.”
    Pretired Nick recently posted…Pretirement story: Planning a move to SpainMy Profile

    • Mr. Utopia September 14, 2013 at 2:23 pm #

      “Worth it” is a relative term for sure. As with any type of service, you’ve got to tread carefully. A real estate agent could be parasitic too – trying to push a more expensive house or have you make a higher offer. Same thing goes with financial planners.

  4. Romona@Monasez September 12, 2013 at 6:16 pm #

    I think people don’t really need financial advisors. There’s enough online resources people can se to learn how to handle their finances.
    Romona@Monasez recently posted…Importance of a Savings PlanMy Profile

    • Mr. Utopia September 14, 2013 at 2:25 pm #

      I tend to agree although there are a lot of people out there with no financial background at all. It may be a psychological thing, but I’ll bet many of them don’t feel they’re able to really grasp the world of finance, investments, etc. There is obviously a market for financial planners since there are lots of them out there!

  5. moneystepper September 13, 2013 at 12:13 am #

    Financial planners and advisors, as with any professional in the finance industry, will be worth it if they can prove that they are worth it!

    If they advise certain ways for you to increase your wealth (that you wouldn’t have considered autonomously), and these methods increase your wealth by more than their fees, then they are worth it.

    If not, they are a cost.
    moneystepper recently posted…Attitude to money – the three second testMy Profile

    • Mr. Utopia September 14, 2013 at 2:31 pm #

      Very good points. The tricky thing is knowing that ahead of time. If you’re paying fees upfront, you may not see a the actual return for a long time. It’s tough to evaluate, but I definitely agree – if you can clearly analyze the cost/benefit, then decide accordingly.

  6. Jacob @ Cash Cow Couple September 13, 2013 at 9:30 am #

    As a future planner myself, I’d agree with most of what you’ve written. I think the key thing is time. If someone is successful at building widget XYZ, they should focus on building more widgets. Unless they have a strong desire to learn about investing and other financial topics, their time is worth more than the percentage of assets under management that they’ll pay to a planner or wealth management firm.

    Another consideration that many people just don’t understand is the availability of certain investment options, such as DFA funds (and others). Investors can’t get access unless they go through a planner. DFA has wildly outperformed Vanguard over the last decade. In fact, the excess returns would way more than cover the added expense of having a planner.

    Admittedly, I don’t use a planner now. And all the required resources needed to manage your own wealth are available for a very low price. But it takes time…
    Jacob @ Cash Cow Couple recently posted…Motif Investing Review – A Better Way to Pick StocksMy Profile

    • Mr. Utopia September 14, 2013 at 2:36 pm #

      We’re on the same page, Jacob, especially on the specialization economic concept.

  7. Jon @ MoneySmartGuides September 16, 2013 at 5:29 am #

    I think the biggest benefit of having a financial planner is keeping you to your plan. Most investors fail because they get caught up in emotion and buy and sell at the wrong time. A good financial planner will look out for you best interests and keep you invested for the long term.

    As for price, the act of keeping you invested is worth the price. I know of a person that has been with a financial planning firm for over 20 years. He recently when back through the years and totaled up the fees he paid. In total, he paid over $100,000. He said that he would of paid more if needed because having them keep him in line was well worth the price.

    I think many people just look of at the fee and balk at hiring someone when they should really be looking at the value a planner can add. Of course there are plenty of “bad” planners out there, so doing your homework and finding a good one is key.
    Jon @ MoneySmartGuides recently posted…Fast Food Workers Pay: How Much is Enough?My Profile

    • Mr. Utopia September 17, 2013 at 9:21 pm #

      Wow, I can’t even wrap my head around $100k+ in fees, but it’s all relative I guess. As you point out, Jon, relying on a financial planner to keep you on track is definitely a benefit. If direction and focus is what one needs, then it might be worth it.

  8. September 20, 2013 at 10:27 am #

    Great well balanced article exploring both sides of the question. I’d suspect for most of us here – we’d rather go it alone by educating ourselves.

    For folks that have no time/interest in learning things for themselves it would probably be very helpful for them. recently posted…Life Insurance and Short Term Disability Insurance – RecapMy Profile

  9. John September 21, 2013 at 7:02 pm #

    Financial planners are well worth it, unless you plan on making your own investing decisions. I really liked this article!!

  10. Molly September 27, 2013 at 5:27 am #

    I know that some people mentioned the idea of the commission based financial planner as possibly not having your best interest at heart. However, I just wanted to share my experience with a commission based planner. My husband and I were introduced to our planner Travis through a friend. We did not realize how many things we were not considering in our financial plan until we met him. He has been incredibly helpful and we have loved having someone to go to. While not all commission based planners may be that way, don’t count them out just on that fact alone! Get to know them first. If you are not comfortable with them, then walk away without setting up any accounts through them. Simple enough. But I just wanted people to see the upside of them– a free planner with a lot of knowledge and insight!

    • Mr. Utopia September 27, 2013 at 8:27 am #

      Thanks for sharing your experience, Molly. A commission based financial planner should have the client’s best interests at heart if he/she wants to be successful in the long term. It seems like you’ve found one such financial planner. They are definitely out there, mixed in with ones that probably don’t have as much devotion to their customers. Glad you’ve had success with one – it sounds like the costs have been worth it.

  11. Ruby J. Cummings December 21, 2016 at 12:07 am #

    Thanks for such a nice post, it’s really informational.
    A financial planner can be an invaluable advisor to you as you work towards your financial goals and dreams. A good financial advisor can act as the quarterback for your team of advisors, working with your tax advisor, insurance agent, etc. to make sure the different parts of your financial plan are working together.
    I enjoyed every little bit part of it and I will be waiting for the new updates.
    Ruby J. Cummings recently posted…How to Ensure You Won’t Run Out of Money in RetirementMy Profile


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