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When do you need a financial planner?

Rounding it up

  • Financial planners help clients look at and prepare for their long-term financial future.

  • People who understand and have time to manage their own finances do not need a financial planner.

  • However, if you’re preparing for a raise, an inheritance, a divorces, retirement, taxes, or another major financial decision, consider getting some professional advice.

  • If you decide not to proceed with a financial planner, make sure to do your own research. For example, the Canadian government offers free financial planning resources and tools.

6 min read

Cedric Jackson
#financial planner#finances#financial advisor#saving

Everyone’s finances look different, but many share one overlapping question: Can my finances benefit from hiring a financial planner or advisor? Generally, yes. With the right research and at the right time, anyone can reap benefits from working with a financial planner. But it’s important to determine whether you’ll find these benefits particularly worthwhile.

What is financial planning?

Before deciding whether a financial planner is necessary, it is important to understand what financial planning actually is. In the broadest sense, financial planning involves preparing for any financial goals in the future, particularly retirement.

Financial planning can also help Canadians ensure they have enough funds to achieve higher education, buy a home or a car, raise kids, etc.

What does a financial planner do?

Financial planners help their clients with all aspects of financial planning. To name a few examples, they can help manage money, provide investment suggestions, and make a retirement plan.

It’s important to pause here and identify the differences between financial planners and financial advisors. Financial advisors handle any aspect of money management, often in the form of investment portfolios, and must have a license according to Canadian law. On the other hand, financial planners do not need a license, depending on the services they provide. These services are often broader as well, ranging from savings to tax management.

When a financial planner is necessary: A quick summary

As a general rule, you should work with a financial planner if you don’t feel confident handling your own finances.

Those who are confident in their ability to manage their finances, including all their assets, debts, retirement planning, and taxes, may not need a financial planner. That being said, it can always be helpful to work with a financial planner due to their expert insights.

Additionally, there are some specific situations when hiring a financial planner will be particularly beneficial. Let's take a look.

1. Those who over analyze or don’t know where to start

Do you find yourself putting off taking control of your finances? Maybe it’s because you tend to overanalyze your options, feel easily overwhelmed, or just don’t know where to start.

If yes, we have some bad news for you. This type of behaviour can be problematic because every moment spent hesitating and overthinking is a missed opportunity to make money.

Here’s the good news: The single decision of hiring a financial advisor could solve all these money woes. With their insights and suggestions, they may provide just the validating push you need to get out of your inaction funk.

2. Those uninterested in personal finance

Some people simply aren’t interested in personal finance. Maybe it is completely uninteresting, or perhaps it is just too complex for them to understand. If you’re one of these people, don’t worry! There is nothing wrong with this — everyone has different tastes and preferences.

However, it may be the wrong decision to let your indifference govern your finances. If you struggle to understand or take interest in personal finances, it’s best to leave it to the pros. Hiring a financial planner makes perfect sense in this situation.

3. Those without time to think about their finances

Even people who understand their finances and the intricacies of financial planning can find themselves in situations where a financial planner is helpful. Especially if they simply don’t have time to evaluate their options or learn more.

Financial planning and budgeting for the future can be time-consuming, and not everyone has enough time in their day or week to dedicate to it. Consequently, hiring a financial planner may be the smart and sustainable move.

4. High earners

High earners, especially those in the top tax bracket, should consider hiring a financial planner. Financial planners can help minimize their taxes on retirement funds, which alone could justify the cost of their expertise.

"As a general rule, you should work with a financial planner if you don’t feel confident handling your own finances."

5. If you’re in line for a raise or inheritance

When people get a significant raise, it can dramatically change their financial situation and lead to short-term spending. A financial planner can help those who just received a huge raise to plan for the future. They can provide investment advice and let clients decide how much of their raise to save, and how much to spend.

The same logic applies to those receiving an inheritance. Financial planners can help these clients decide how best to use the money, adjust to financial changes, and take care of any final financial matters related to the deceased person.

6. Spouses with different money goals

For many married couples, finances are among the biggest challenges to navigate. This is especially true when each person has a different approach to money.

If you and your partner are in this predicament, a financial planner can almost act like a financial therapist. Not only will they provide money advice to both partners, they’ll also provide each with the chance to share their financial ideas and reasons behind each one in a productive and agreeable manner.

That’s because the financial planner is a neutral, third party expert with both partner’s best interests in mind, making it easy to follow their advice without bias or ego. They may also be able to find some financial compromises to help the couple work towards their goals.

7. Those going through divorce

Spouses tend to have commingled finances, making a divorce very complicated from a financial perspective. In these situations, a financial planner can help clients protect themselves during the divorce and adjust their savings, investments, and goals for their new familial situation.

8. Retirement planning

Not all retirement planning requires a financial planner, but they can be helpful in a lot of situations. This guidance is applicable to people of all ages; retirement requires long-term planning, so the earlier a person starts saving, the better prepared they will be for retirement.

Planners can come in handy if you’d like to check whether you’re on track for a comfortable retirement. Maybe you want expert advice on how to increase retirement savings. Perhaps you simply want to know which retirement goals to set. Whatever your retirement questions may be, a financial planner can assist.

9. If you’re about to make a major decision

It is also wise to hire a financial advisor before making any major decision that will significantly impact a person’s life, like purchasing a home, getting married, debating a marriage contract, or selling a business.

With these clients, financial planners can determine whether a major decision is financially feasible. They will also help them understand how the decision will impact their finances in the long run.

10. Tax-related situations

Taxes can be complicated, but financial planners are available to simplify. As already mentioned, planners can play a critical role when dealing with taxes for retirement. They can also assist with other tax-related situations, like advising clients on what types of investments can reduce their tax burden or preventing clients from owing back taxes.

Alternatives to hiring a financial planner

If you decide to not proceed with a financial planner, no worries! The Canadian government offers a vast selection of financial information including planning tools and calculators, as well as financial literacy programs.

You can digitally cross the border to use free financial planning tools from the U.S. government as well. Since they are free and readily accessible, there are no country restrictions.

Additionally, KOHO offers free financial coaching to all KOHO Premium account holders. Not to be confused with financial planners, and financial coaches are certified money experts who help you manage your own finances.

So, while many people can benefit from hiring a financial planner, it’s not always necessary. Unless you’re in one of the particular situations highlighted above or have a specific goal in mind that requires professional help, you can make educated and responsible decisions with your money with the right research and resources.

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