Should you work with a financial planner?
I was demonstrating my software, and highlighting the key capabilities of Simple Home Finances Master Money Toolkit to a small group. When discussing Retirement and how to model different allocations of your investments in Retirement Planning, a discussion was started about using a financial planner. I am of the distinct opinion that most of us would be wise to work with a financial planner. There are many reasons for this, but there is also a reasonable argument against using a financial planner.
When you are sick, you may try over-the-counter medications and home remedies. If you find you are not recovering, you go to see a doctor. You do this because the doctor is an expert when it comes to your physical condition and overcoming physical ailments of all kinds.
When you get into legal trouble, you more than likely hire a lawyer, because a lawyer is an expert in the how the law works and how the law can be used to protect you or those you care about.
Many of us pay for someone else to file our taxes every year because there are tax experts that can help us legally keep more of the money we earn.
Now, when it comes to managing your investments, why would you do-it-yourself when there are experts who understand the markets and how to make money whether the market moves up or down? Possibly because you don’t feel that you can find a financial planner you can trust, or maybe you have been burned by a financial adviser who maximized their earnings at your expense?
Well not all Medical Doctors are good. Not all lawyers are good. Not all tax advisers are good and not all financial advisers are good. But good doctors save lives, good lawyers keep the innocent out of legal trouble and good tax advisers help people avoid unnecessary taxes and yes good financial advisers help people protect and grow their investment in all markets.
To say I won’t use a doctor or lawyer or tax adviser or financial adviser because they may not be good is self-defeating. The real issue is that you want to find the doctor, lawyer, tax adviser, and financial adviser that are good and hire them. They are the experts.
I used to manage my own investments, and I had good years and bad years mostly because I lacked the expertise to know when to move out of or in to the market. After the market crashed in 2007-2008, I decided I could no longer afford the time it would take to analyze and learn how to invest. In short, the practice of buying and holding an investment for a long time just no longer worked. When a market goes through long growth cycles and short market contractions, the buy and hold approach works pretty well. But the market we have today is extremely volatile and will likely remain this way. I believe today we need to grow when the market goes up, and preserve principal and grow when the market goes down. That takes a kind of expertise that many of us do not have, and that we can not spend the time to learn.
When it comes to selecting an advisor save yourself some time and pick one that is a fiduciary advisor. A fiduciary advisor is legally required to put their clients' interests ahead of their own.