Have you been thinking about / considering hiring a financial planner, but wondered, “Do I really need to?”
Alright, let’s tackle the main two objections:
1. “It seems like an arduous undertaking. Do I have time for this right now? I don’t even know where all our financial information is. What’s the rush, we’ll get to it eventually.”
2. “Is it worth it?” Let’s address this elephant: There is a cost to hire a financial advisor and typically is a fee as a percentage of assets, our practice operates the same way. The truth is there is no great way to pay for advice, guidance, and financial planning, but we believe this is the best of the options.
It is largely believed that there are eight core modules where financial advisors may add value:
- Suitable asset allocation using broadly diversified investments
- Investment selection
- Rebalancing
- Behavioral coaching
- Asset location
- Tax-efficient retirement
- Total return vs. income investing
- Tax-loss harvesting
It sounds like a straightforward checklist. It isn’t.
But think of your financial plan like a surgical procedure. A skilled surgeon doesn’t just perform one step correctly, every decision in the sequence must be right, and in the right order. You don’t want a surgeon who’s excellent at 55% of the procedure, average at the other 45%.
Many of these modules on their own could be successfully completed by a DIY investor.
Example: I recently met a couple from the Midwest, 39 years old, built a wonderful low-cost diversified portfolio. They had maxed their retirement plan for years using pre-tax contributions and while they built an impressive net worth, they felt broke and lacked liquidity—They made a costly mistake of ignoring asset location.
Here’s the situation: You’re done work, then in a rush to get kids to practice, flying through Chick-fil-A, shuffling through showers, preparing tomorrow’s lunches, buried in laundry; Rinse & Repeat all week.
Career’s flying, you’re crushing the income game, doing everything you can in your “down time” to DIY your investments… but have you ever paused to think “How might all this work with taxes in retirement?” Probably not.
Another example: We recently met with a high-earning east coast couple that had about 90% of their assets in pre-tax retirement plans. They had employer-based retirement plans with amazing investment options. We showed them an example of what taxes might potentially look like in retirement in their current plan versus making changes to utilize Roth and after-tax investments. By increasing their taxes today, they look to potentially save $100s of thousands of dollars throughout their lifetime.
Here’s the bottom line: You can likely DIY manage some of the finances yourself, but as life gets busier, the dollars increase, and time dwindles, the stakes (or mistakes) begin to really compound.
At Know My Plan, we specialize in working with high-achieving families who are making $300k+ annually and typically 35-50 years old, family oriented, with a few dogs (if you don’t fall perfectly in that demo, it’s okay, call us anyway).
Busy professionals depend on us to get it right so they can show up for their family and their career.
A financial planning mistake at 38, 42, 51 might not materially cost you today, but that mistake going unchecked and compounding for 10-25 years is irreversible.
If you can relate to this and you recognize you could the help of you a financial planner or might want to make a change from your current advisors, please get in touch with us, we’d be thrilled to work with you and build you a financial plan that’s right for you and your family.
–Nic
This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Above examples are hypothetical in nature and may not be representative of an individual clients’ experience. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance may not be indicative of future results.
