As a Certified Financial Planner, it’s cannot be a big surprise that I encourage people to meet with a financial advisor and see if working together makes sense. I very much believe in what I do and have witnessed firsthand the difference a financial advisor can make in a person’s life. I am also aware that people who choose to DIY their finances can do just fine too. But I also believe the average person, as much as they want to have a stable and successful financial life, will not do the work long-term without a coach to keep them on track. Our financial lives are always evolving and are never “done”. Without regular reassessment of our goals and progress, we face an increased likelihood of not achieving our dreams.
There is nothing wrong with seeking help or doing it yourself. Just as some people choose to change their own oil, others go to a garage. Or some opt to color their own hair while others go to a salon. Neither is wrong.
However, your finances affect the well-being of your entire life, so you need to make a thoughtful decision as to what makes sense for you. You need to consider whether you have the interest, skills and desire to do it yourself. Some of you may not have the skills now but are eager to immerse yourself in the world of personal finance and investing to learn everything you can now and throughout the remainder of your life. Others want to be financially confident and make informed decisions but not necessarily learn every nuance themselves. They want to work with a coach instead.
I love to workout. I get up very early in the morning to squeeze in my daily workout and I don’t feel quite right on those rare occasions that I have to skip one. A few years ago, I got hooked on Boot Camp. I consider myself to be in good shape, but WOW! The intensity of the workout was insane and left me exhausted and exhilarated afterwards. I realized that my intensity wasn’t as high or sustained when I worked out by myself. Without having anyone to push me to do better, to encourage me, to challenge me—I had actually stagnated.
Stagnation when it comes to workouts just leads to stiff and sore muscles. But financial stagnation can have a much higher cost. It may mean not achieving your goals when anticipated or even at all or being unaware of a heightened risk exposure or potential opportunities.
Once you know what you want for yourself financially, I recommend adding a financial coach to your team. Or if you find yourself struggling to set authentic goals, they can also help you articulate what you want your money to do for you too. When looking at long term financial goals, there are a lot of factors to consider:
All of these factors are important in developing financial goals and planning for them correctly. Too often, I met with clients approaching retirement who failed to consider several of these items. If they had hired a financial advisor years earlier, they could have used the time to save more accurately for their goals. Now we are trying to play catch-up.
When I hear or read people advocating that people do-it-themselves, they often say financial advisors don’t care about your finances they way you do. And that is a good thing in my opinion. Now hear me out before you start sending me nasty emails or tweets! Nobody should care more about your finances than YOU do because they are YOUR finances and YOUR dreams/goals. Therefore, the person who should be the most vested in your finances IS YOU! It shouldn’t be me. It shouldn’t be anyone else but YOU. Now with that being said, your financial advisor should provide you with the tools and guidance to help you make informed decisions and act in your best interest, not their own.
One of the greatest gifts I offer my clients is my neutrality. I absolutely want my clients to achieve the lives they want for themselves, and in order for me to help them do so, I need to be able to look at their situation objectively and keep my perspective when my clients cannot. As much as you need to be invested in your finances and your goals so that you will do the work needed to achieve them, it can also cause you to be blind to some of the risks and opportunities that you have.
I know this because I feel the same way about my own finances. Nobody is more invested in our finances than my husband and me. It is our life—our hopes and dreams—and we take them very seriously. I believe I do a great job putting together our investment strategy, but I also know that my own desires and fears can affect my objectivity, which is why I have another financial advisor review my plan. Even as a CFP® with 23 years experience, I don’t even completely DIY my own finances because they mean too much for me to not have a second pair of eyes see if I missed anything or to challenge me to think differently about what I can achieve.
The truth is we can be our own worst enemies when it comes to realizing our dreams and therein lies the greatest risk of DIYing your finances—your lack of objectivity. You may swear that you’re looking at your choices objectively, but the reality is sometimes we are simply too close to see the forest through the trees. Even if you choose to DIY the majority of your finances, I would still encourage you to have a professional review your plan. You may be surprised by what you missed.
I do understand why some people are leery of financial advisors. I’ve seen the headlines too and know that some financial advisors have taken advantage of their client’s trust. This saddens me beyond belief, but I also know there are many advisors who want nothing more than to help put your money to work for you. On Wednesday, I’ll share some questions you should ask potential financial advisors and what else you should consider before hiring one.
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