Four Times DIY Investors Should Talk to a Financial Adviser

A woman works on retirement planning paperwork at her dining room table.

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I believe that most DIY investors in the U.S. don’t need to hire a financial adviser solely for investment purposes. I appreciate this is an unexpected take from an adviser writing an article on reasons why said group should hire a professional.

But in most cases, it’s a relationship that can be full of conflict and frustration that can end in a breakup.

For the purposes of this article, we should differentiate between financial planning and investing. From an investment standpoint, DIY investors have a wealth of resources and low-cost access to investment platforms and investment vehicles that often charge no commissions.

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So, hiring someone to buy a mutual fund for you can be kind of like hiring someone to mow a small lawn when you already have the lawn mower out. Comprehensive financial planning, however, is much more specific to your situation and can find blind spots in your current plan.

Here are four situations where I think a DIY investor should consider hiring someone for both their planning and their investments.

1. Health issues

In 2016, I had a meeting with a husband and wife who were prospective clients. The husband had read 27 personal finance books. This raised the question of why he was sitting in my office.

The reason: pancreatic cancer. What I expected to be two personal finance nerds geeking out for 60 minutes ended up being a tear-filled conversation about continuity planning.

While I have not met anyone else who has read quite as many personal finance books, I have had many conversations like this. There is a natural division of labor in households.

As you may expect, in my household, I handle the financial planning and investments. My wife handles the monthly cash flow and bills. If something were to happen to me, she would need someone to step in and fill the financial planning and investment role.

The flip side is also true. God forbid something happens to her — I really don’t know how I would be able to juggle everything. It’s a horrifying thought.

If you or someone you love is in poor health, you should be talking to a professional about contingency planning.

2. Emotions

In the past 16 years, the three periods I have seen people make the most emotionally driven investment decisions were in the years after the global financial crisis (GFC), during the COVID pandemic and today.

In the last couple of months, I have seen those in the conservative camp go way overboard on equities, believing that deregulation and tax cuts are poised to send the market straight up.

I have seen those in the liberal camp sell all of their stocks or go way overweight in international equities, believing that America is doomed.

Obviously, neither of these is the right answer.

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Everyone’s financial plan has a necessary rate of return that, in theory, will allow you to maintain your lifestyle without running out of money. We rely on financial planning software to figure out this number. You can access a free version of our software online.

From there, the goal is to achieve this return with the least amount of risk possible. This has absolutely nothing to do with politics or with market timing.

If you were able to manage your emotions through the GFC and through the pandemic but have recently made extreme moves, it may be time to talk to a professional.

3. Tax planning

In 2021, I took the three exams required to become an IRS enrolled agent. This license is typically reserved for tax preparers. Tax preparation is handled by a separate department in my firm and might seem like a waste of time for a Certified Financial Planner.

Not to mention that memorizing forms, formulas and tax penalties is mind-numbing stuff. But it’s impossible to overstate the overlap between financial planning and taxes.

It also presents an incredible business opportunity to be able to advise in what is often a gray area between the tax professional and financial adviser.

Taxes are the biggest blind spot I find among DIY investors. Perhaps it’s because it is so boring. Perhaps it’s because it’s so complicated.

Whatever the root cause, the bigger your balance sheet, the more impactful tax planning can be. Or, conversely, the more detrimental it can be to skip over.

Recently, I met a gentleman with over $10 million in his company stock. He was savvy enough to realize that tax planning was important in divesting the stock from a capital gains perspective, but failed to realize the estate and tax planning necessary to avoid estate taxes at death.

4. Time constraints

In my experience, very busy, very successful executives hire advisers. There are two reasons. One is arbitrage. They can typically make more with their time than they have to pay someone to help them. It’s the same reason I hire someone to pull weeds.

The other is time. They simply don’t have enough free time in their day to dedicate to their finances. Despite how busy these execs are, I would argue that retirees actually have less time. More free time in their day, less free time left on earth. Bleak, I know.

But you need to decide if you want to spend your most precious resource on your finances.

There is no right answer here. Many DIY investors actually do. They enjoy the exercise.

If you’re losing enjoyment or if you’re sick of watching the market while you’re on vacation, it may be time to hand over at least one rein.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.