Why can’t I just hire a Financial Planner?

You can hire a Financial Planner. But how do you know who to hire? When you do hire someone, how do you know that they are doing a good job? What happens if you decide to change financial planners one day — how do you know that you’ve got all the information you need and you are transferring everything correctly to the next person?

There is no getting around knowing your basics. That’s what my mom used to say (and I hate to say she was right!) They say that death and taxes are the only sure thing in this world, but I would add one more — change. Change is a sure thing in this world. Change is constant. To be fully dependent on someone for something as important as your finances is a dangerous game. If not knowing a lot about cars can get you in trouble (how many of us have gotten stiffed by the mechanic who scared us into thinking something else was wrong?) — then imagine having your money in the hands of someone who doesn’t know what they are doing, or who is more interested in selling you products than watching out for your best interests. How much education is enough education? Here is my golden rule — you should know enough to be able to gauge whether the advice being given to you makes sense. Now, I am not saying that you need to be able to implement that advice yourself, or be able to think of it in the first place. That’s the planner’s job. But if you hire a good planner, that planner should give you a basic education everytime they work with you or present you with their advice. They should encourage as many questions as possible, and never make you feel dumb for having asked. They should be able to explain things in a simple, relatable manner personalized to your level of understanding. And if and when they do, you should pay attention! Now, I’ve been guilty myself of daydreaming when finance talk used to come up. This was when I was married and had a husband who was in finance. I trusted him to take care of everything, and he was trustworthy, so that was not the problem. The problem was that when I was divorced and on my own, I made way too many mistakes managing my own money. Even if I had stayed married, what if something had happened to my husband and I was on my own with children? How would I have coped? Now here is the interesting part — I felt intimidated by the financial world even though I was already a CPA. So if I felt that way, I can only sympathize with how you must feel. But you know what? Once I got divorced and was forced to educate myself, it really wasn’t that bad. Yes, it was boring and tiresome initially. And there are times when it can still get tedious. But, like anything else in life, it’s not so bad once you know your basics. Learning to play an instrument is boring when you are practicing your scales. But once you know them you can make beautiful music. (Yes, I know, cheesy — but true!)

So when looking for a financial planner, here is my advice on the qualities to seek:

1) Education

As we just discussed, your planner should want to educate you, slowly and steadily, over the years, as to why he or she is taking you in the direction that they are. They shouldn’t be the type who tries to confuse you with their words. You don’t need an avalanche of knowledge to rain down upon you from day one. Also, the best way to learn about your finances is in practice, not theory, so what better time to acquire knowledge than when you are actually making financial decisions and dealing with your own money?

2) Holistic Planning

Make sure the planner is someone who does comprehensive financial planning. There are too many planners out there who don’t have enough knowledge or credentials for this field. Proper financial planning encompasses many areas — tax, investing, insurance, children’s education, estate planning, retirement planning, alternative or emergency planning, budgets and expenses, asset diversification, and more. No one can be a deep expert in every area, but the right planner will know enough to alert you if anything seems amiss or needs further investigation.

3) “Do unto others . . . ”

The right planner doesn’t just say that they value their customers. They mean it. My own personal philosophy is based off Karma — I treat others the way I would want to be treated. Because if I don’t, then how can I complain when I am not treated well?

4) Communication and Organization

A few other factors to look for when choosing a planner — organization, communication, and availability. Does the planner seem to misplace your documents or forget the details of what you just told him the last time you met? Do you find it hard to communicate with your planner or get a clear, concise answer to the questions you ask? Is the planner someone who takes weeks to respond when you urgently need help on a mortgage refinancing issue?

5) Independent Affiliation

Trust is very important in choosing a financial planner, and the right planner will not recommend products or strategies that don’t make sense for you. The right planner is not going to push you to invest every dime with them or plough a disproportionate amount of money in a limited number of products. Look for a planner who is not affiliated with just one company and has quotas to meet. Look for someone who belongs to an independent boutique shop.

That said, it is important to note that trust alone — or any of these factors alone — is not enough. Many people go by instinct and impulsively pick a planner because they share the same hobbies or know the same people. That can be a mistake. Planners can be nice and well - inten­tioned, but this doesn’t mean that they always know what they are doing. This is why I advise you to learn the fundamentals of managing your own finances. You are the best advocate for your own money. You may use blind trust or referrals to hire a plumber — but that’s a one-time, quick job. The right financial planner should be with you for many years. So the answer is yes, you can hire a financial planner. They can be invaluable when it comes to guiding you in the right direction and helping you cut taxes and costs and increase earnings and growth. They can help you organize your accounts and put into place contin­gency planning in case of an emergency. They can provide deep expertise and broad expertise in many areas. But at the same time, you need to be a partner in the process. Know your basics.