Whether you are just starting to save for retirement, getting ready to call it a career or somewhere in between, you might think that you do not need a financial planner to help you make decisions. The widespread availability of discount brokers, the growing trend of no-cost mutual fund and commission-free trades and the emerging technology of stock market smartphone apps has made being a DIY investor easier than every before, but just because you can go it alone does not mean you should.
There are definitely advantages to being your own financial advisor, especially if you are active, engaged and well informed. But even the most ardent DIY investor could be missing out on some key benefits by not seeking the help and guidance of a professional.
Access to Lower Cost Institutional Class Funds
Many brokerage firms and mutual fund companies offer lower annual fees and breaks on commissions for their wealthiest clients, providing access to a special class of funds with reduced costs and higher returns. But there is another class of mutual funds out there, one that even the most well heeled brokerage customers may not be able to access.
Institutional class mutual funds provide the lowest costs of all, and that could save you enough to pay for the professional guidance you are receiving. This is the class of mutual funds pension plans, government entities and the ultra-wealthy use, and working with a financial planner could give you access to them.
Retirement Income Estimators
It is not always easy to tell how much you will need to save for a comfortable retirement, especially if you are tackling the job on your own. There are dozens of retirement calculators out there, but their quality and usefulness varies widely.
Experienced financial planners will have access to a far better class of tools, including retirement income estimators that look at how much you have saved, how much you plan to save in the future and calculate the amount of income you can expect to receive.
Not only do financial planners have access to tools like retirement income estimators, but they also have the knowledge to put the results in perspective. A good financial planner will be able to help you quantify the results, so you can see where you stand and where you need to go.
Creation of Retirement “Paychecks”
After a lifetime of diligent saving and smart investing, many new retirees are at a loss. They knew how to accumulate a sizable nest egg, but they do not have the first idea of how to turn that money into a steady stream of income.
Working with a financial planner can be essential for these new retirees, helping them avoid costly mistakes at this critical juncture. From immediate annuities to managed payout funds, financial planners have access to dozens of tools to help retirees create their own post-work paychecks.
Help With Social Security Claiming Strategies
The regulations that govern Social Security are enormously complicated, with thousands of pages and no small amount of legalese. Simply reading these documents would take many months, and understanding them could take far longer.
With so many competing claiming strategies, it is easy to make a costly mistake when signing up for Social Security, but a financial planner can make it all clearer. This help alone could more than pay for the cost of a financial planner, potentially increasing your yearly payout by thousands of dollars.
Advice on Insurance
The best financial professionals take a holistic approach to serving the needs of their clients, looking not just at investments and retirement planning but insurance and the protection of assets. When talking about insurance, your financial advisor has the advantage of a complete picture, and that will make it easy to determine how much protection you need and what form that protection should take.
From recommending an umbrella insurance rider for your automobile and homeowners insurance to providing specific advice on things like business interruption insurance and liability coverage for your home-based company, your financial advisor can be a real asset in all aspects of your life and livelihood.
There is a strong desire to go it alone when investing. Keeping control of your retirement savings and not trusting your nest egg to a third party are powerful incentives, and for many the DIY approach has been working flawlessly for many years. Even so, there are also some compelling reasons to seek professional health and guidance, including the often overlooked benefits listed above.
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