What Does a Financial Planner Do & When to Hire One?

Hiring a financial planner can feel like a big step, but it doesn’t have to be overwhelming. Whether you’re managing your investments confidently or feeling lost in financial jargon, this guide helps break down the essentials. When should you hire a financial planner? And, just as importantly, what do they actually do? Let’s explore those questions and uncover the real value they bring.

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You Might Not Always Need a Financial Planner

Here’s the truth: not everyone needs a financial planner. If you’re financially savvy, comfortable managing your investments, and confident navigating financial decisions, you might be doing just fine on your own. For some, a DIY approach works well, especially during simpler financial phases of life.

For example, if you’re just starting out, you might not yet need professional guidance. If your financial life is straightforward—without complex tax concerns, major investments, or retirement planning—it’s possible to take control on your own with the right tools and research.

But there’s value in having someone double-check your work. Even if you’re a true DIYer, a one-time consultation or occasional check-in with a planner can help ensure you’re on track. Think of it as getting a second opinion.

When Hiring a Planner Makes Sense

Life often throws financial challenges your way, and that’s when professional help shines. Here are common situations where hiring a financial planner can make a difference:

• Entering a new career or higher income bracket: Physicians and other high-income professionals often face complex tax and investment decisions.
• Big life milestones: Getting married, buying a home, or planning for children brings new financial hurdles.
• Nearing retirement: Decumulation planning—figuring out how to withdraw money efficiently—can feel like navigating uncharted waters.

You want an expert when things get complicated. For instance, understanding how to do a backdoor Roth IRA conversion or building a tax-efficient investment plan isn’t everyone’s strong suit, and that’s okay. A planner can guide you through the weeds, so you don’t waste time or money on avoidable mistakes.

Accumulation vs. Decumulation: Where It Gets Tricky

Think of your financial journey like climbing a mountain. The climb—saving money, investing, and growing your wealth—is called accumulation. It’s mostly about consistency: saving diligently, sticking to low-cost portfolios, and keeping your emotions in check when markets fluctuate.

Coming down the mountain is more nuanced. Decumulation, or the process of withdrawing money in retirement, requires a clear strategy. Now, you’re faced with questions like:

• Which accounts should you pull from first?
• How do you limit taxes as required minimum distributions (RMDs) kick in at age 75?
• What about Medicare costs and Roth conversions?

These decisions go beyond simple saving habits. That’s why many individuals who have climbed the mountain as DIYers seek a planner’s help on the way down.

What Does a Financial Planner Actually Do?

It’s easy to think a financial planner just helps pick investments. But that’s only one piece of the puzzle. Planners provide a broad range of services that help create a complete financial picture. Think of them as your financial quarterback, organizing all the moving parts and ensuring they align with your goals.

Here are the seven primary areas where planners add value:

1. Comprehensive financial planning.
2. Asset allocation.
3. Investment selection.
4. Behavioral coaching.
5. Systematic portfolio rebalancing.
6. Tax management.
7. Retirement spending strategies.

Let’s take a closer look at each one.

Comprehensive Financial Planning: The Big Picture

A financial planner doesn’t just look at one piece of your finances. They aim to bring everything together into a cohesive plan. This includes:

• Cash flow planning: Can you afford that dream home or new car?
• Emergency fund setup: Ensuring you have a safety net for the unexpected.
• Long-term goals: Retirement, college savings, or future business ventures.

Each planner’s approach may vary, but this holistic view matters. You want someone who considers your entire financial picture, not just one aspect like insurance or investments.

Asset Allocation: Dividing the Pie

Asset allocation is about dividing your portfolio into categories like stocks, bonds, and cash to match your goals and risk tolerance. For example:

• Your Roth IRA might lean aggressive with long-term growth.
• An emergency fund should remain liquid in cash.
• Taxable accounts may balance risk and income needs.

A planner ensures these pieces work together efficiently and support your overall financial goals.

Investment Selection: Choosing the Right Tools

Once the allocation is set, investment selection fills in the gaps. Planners help choose specific funds or assets—like ETFs, index funds, or municipal bonds—to round out your portfolio. For high-income earners, careful fund selection can even reduce tax burdens. If those decisions feel overwhelming, a planner steps in to simplify them.

Behavioral Coaching: Keeping Emotions in Check

Human emotions are often the biggest hurdle in investing. Behavioral coaching helps you stay steady when the markets fluctuate. Panic selling during downturns or jumping into “hot” stocks during a rally can cost thousands in the long run. A planner acts as a buffer, helping you stay rational in the face of emotional decisions.

For some, this is where a financial planner’s value really stands out. Vanguard research suggests behavioral coaching alone can add up to 2% in annual portfolio value. Imagine that over decades.

Systematic Rebalancing: Staying Aligned

Rebalancing ensures your portfolio stays in alignment with your target allocation. Over time, market performance can cause “portfolio drift,” where certain assets outweigh others. For example, booming U.S. stocks might leave your international investments lagging. Rebalancing brings everything back to your intended mix.

While it’s not the flashiest service, rebalancing is essential for managing risk. A good planner will take care of it automatically.

Tax Management: Avoid Overpaying Uncle Sam

Tax management is one of the most significant areas where planners can help you save money. It goes beyond choosing tax-efficient funds. Planners coordinate with accountants and advise on strategies like:

• Maximizing HSA contributions.
• Roth conversions during the “tax-efficient window” after retirement but before RMDs begin.
• Determining whether traditional or Roth retirement accounts best fit your situation.

Proactive tax planning can have a tremendous impact on your long-term financial health. If taxes feel like a black box to you, this is where a planner is invaluable.

Spending Strategies for Retirement: Withdrawal Order

Once you’ve saved for retirement, figuring out how to withdraw funds efficiently is crucial. Your planner helps determine the best withdrawal order to minimize taxes and avoid penalties. For instance, they might recommend pulling from taxable accounts before touching Roth IRAs to manage your taxable income.

This phase also involves planning around Medicare limits, RMDs, and other tax implications. It’s a complex process, and a planner can guide you through it.

How to Choose the Right Financial Planner

If you’ve decided a financial planner could help, the next step is finding the right one. Look for these key traits:

• Certification: A Certified Financial Planner (CFP) designation ensures they’ve passed rigorous training.
• Fiduciary duty: They’re required to act in your best interest.
• Clear communication: You want someone who explains concepts without unnecessary jargon.

Fee structures vary too. Some planners charge hourly or by the project, while others use asset-based fees. Choose a structure that aligns with your needs and budget.

Conclusion: Should You Hire a Financial Planner?

Hiring a financial planner isn’t about checking off a box. It’s about partnering with a pro who helps you navigate tricky financial situations. Whether you’re building your wealth, transitioning into retirement, or need strategic tax advice, planners bring clarity and structure to the process.

If you’re unsure, start small. Schedule a one-time consultation or consider hourly advice to test the waters. The goal is to find someone who brings value to your specific situation.

When you’re ready, do your research. Look for a reputable planner who aligns with your goals, values, and needs. And no matter what, always prioritize building confidence in your financial decisions.

 

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