Do You Need a Financial Planner? 5 Points for and Against Hiring One

Hiring a financial adviser is a big decision, and one that you should weigh carefully before jumping in. That means both doing your research, and maybe even a little personal soul-searching to determine if you’re at a place where you can truly tap into the value a professional can provide.

If you’re on the fence in the debate on whether or not to hire a professional, consider these five points that cover some arguments “for” and a few “against.”

Yes: When You Don’t Have the Time or Energy to Dedicate to Proactively Managing Your Financial Life

If you have big ambitions for your finances, then you must get proactive. Simply reacting to things after they happen won’t be enough to achieve truly big goals or to grow significant wealth. You have to go on the offensive and actively seek out ways to accomplish what you want.

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But doing so requires a lot of time, energy and mental space … and if you’re like most high-achieving people, you’re already devoting a lot of those resources to your specific zone of genius. Maybe that looks like excelling on a career track, or running a successful business, or acting as the Chief Operating Officer of your family to keep your home life humming along smoothly.

Whatever it is in your life, there’s likely very little room for adding another full-time job: which is exactly what financial planning and wealth management is. It’s a full-time job that requires big responsibilities and commitments. If you don’t have the space to take that on, it’s likely best to outsource to a professional.

Even if you’re not already feeling crunched or pressured by your existing work, most people deeply value paying for services (like takeout dinners and housekeeping) that add more time to their days. The benefits of hiring a financial planner include knowing that an expert is manning the helm of your financial ship, ensuring things don’t fall through the cracks, navigating around trouble spots, and getting you to where you need to go … without you needing to manage it all on your own.

No: When You’re Not Seeking a Collaborative Relationship

One of the biggest benefits of working with a personal financial planner is the opportunity to establish a long-term, trusting relationship with an expert who can provide advice, guidance, coaching and accountability.

But that means you need to want to be coached; you need to value a guide and appreciate that you have someone on your team who is minding the cracks and ensuring nothing slips through (even if, sometimes, that means sending reminders on actions you need to take).

A personal adviser is not just a service provider. They are someone you need to like, trust, depend on and listen to even when — especially when! — they need to tell you something you might not want to hear. Not everyone desires this kind of relationship, and there’s nothing wrong with that.

If you don’t necessarily see the value in a consultative approach, it might not make sense to pay for that level of service. Or, if you’re not at a point in your life where you feel you can build that level of rapport and trust with someone serving as your financial adviser, you may get better results by taking a DIY approach. You might also simply appreciate general guidance more so than an all-in, hyper-detailed and customized solution; in this case, perhaps a robo adviser platform is more in line with the level of support you need.

Yes: When You’re Not Sure What’s Valuable Information, and What’s Just Noise

The internet is an incredible tool that makes an essentially infinite amount of information accessible to you on demand. Theoretically, the internet makes it possible to teach yourself almost anything, or to learn whatever you want to know.

In practice, however, you can’t truly Google your way to the best answers for your situation for every question you have. This is especially true in a nuanced area like financial advice.

Yes, you can find rules of thumb and guidelines. You can get a lot of opinions and perspectives. You can study laws and rules and facts. But you can also find yourself in a lot of trouble because of two limitations: lack of context (or not knowing how to apply the facts to the specifics of your financial life), and abundance of noise.

Psychologists and behavioral economists Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein define noise as “unwanted variability in professional judgments.” There is considerable noise in financial planning because so much depends on context and completely subjective factors — like your values, your specific goals, your interests, the tradeoffs you’re willing to make and your nonnegotiables in life.

Noise can come up even when the information you have is factually accurate … but just misapplied to your own life. It can happen when you get two opinions from two anonymous internet forums or blogs about what you should do with your money or your life.

This is where hiring a personal financial planner can provide an immense amount of value. A good planner will start not with the numbers, but by seeking to understand you as a person. That provides the context and framework around which to build a plan that brings in the objective facts and figures of your situation, backed by the wisdom and experience of a trained, certified professional.

If you’re not confident about what’s significant, and what is just noise, it might be time to bring in a financial planner to help you sort through the information. This is especially true as your financial situation grows more complex over time.

No: When the Planning Is ‘Free’

The job title of “financial planner” or “financial adviser” is not something that’s regulated by any official legislative body or organized group that sets out specific standards or ethical guidelines. Unlike designations such as the CFP® marks, there’s no barrier to entry to calling yourself a planner or adviser.

That puts the burden on you as the consumer to understand the business model of someone promising to give you financial advice. A red flag here is when you’re considering working with someone for financial planning … and they are offering to give you a financial plan for free.

That individual is going to be compensated somehow, so it’s important to ask: how? When the planning is “free,” it’s often attached to a sale of a product — be that insurance or a particular investment that will pay the salesperson a commission.

Some of these products and solutions do have a place within a financial plan, for some people. But they are not universally good options for everyone in every situation. If you set out to get financial planning advice from a true financial planning professional, that’s the service you should look for and expect to pay to receive.

Yes: When the Cost of Mistakes Starts Adding Up

Most people think of “compounding” as a good thing. Compounding returns is what allows you to generate more and more assets from your investments as you keep them in the market; one could argue that it’s compounding, not investing prowess, that Warren Buffett truly has to thank for his massive wealth.

But compounding can work against you, too. The effect of a small mistake gone unnoticed can compound over time to equal massive opportunity cost, or a missed chance to grow your money. It’s not just what you miss out on, either; it’s the mistakes you don’t even know you’re making (like accidentally overfunding your Roth for years because you’re over the income limits you didn’t even know existed, and owing the IRS a significant amount in penalties for the error).

When you first start out, the cost of mistakes is likely going to be low and perhaps even trivial — to the point where simply getting started is usually more important than worrying about the perfect strategy or avoiding every possible misstep you could make.

This doesn’t hold true over time, however. The more you have, the more you have to lose — and the more you put at risk. There’s no reason to put your long-term financial success on the line simply because you never bothered to get a second opinion or work with a professional who could have pointed out missed opportunities, unnoticed threats or gaps in your protection against risks.

If you’ve always done your own planning and money management, you might think you don’t need a financial planner to help you. But everyone has blind spots, and we all have knowledge we didn’t even know we didn’t know. There’s a reason high-achieving businesspeople have mentors and elite athletes have coaches … and why most wealthy people want guidance from a financial adviser: They value expert guidance, experience and perspective, and they want to understand both when to act and when to hold the course.

A personal financial planner can help you do the same, and the value they provide in helping you steer clear of mistakes and bad choices alone is likely worth far more than any fee you could pay.