Do I Need a Financial Planner?

What Is a Financial Planner?

Financial planners often take a holistic approach that considers your overarching financial situation. From there, they'll offer a comprehensive plan for moving forward based on your unique goals. They can provide personalized advice around:

• Budgeting
• Saving
• Debt repayment
• Investing
• Retirement planning
• Taxes and estate planning
• Insurance planning
• Meeting your short- and long-term financial goals

Certified financial planners (CFPs) have earned that designation from the CFP Board of Standards. That means they've fulfilled an education requirement, passed the CFP exam and have experience working in the field. They also have a fiduciary duty to their clients and are obligated to act in their best interests.

The terms "financial planner" and "financial advisor" are often used interchangeably, but they aren't quite the same thing. Financial advisor is a catch-all term that includes financial planners, wealth managers, investment advisors and investment brokers.

Learn more: Fiduciary vs. Financial Advisor: What's the Difference?

Pros and Cons of Hiring a Financial Planner

A financial planner can be a great resource, but it isn't for everyone. Here are some important benefits and drawbacks to consider before hiring one.

How Much Do Financial Planners Charge?

Rates vary, but you could pay roughly $250 per hour to work with a financial planner—or $4,000 as an annual retainer fee. One-time financial planning services, like setting up a plan for you to run with on your own, typically costs around $2,000. Only you can decide if the value a financial planner provides is worth the cost. If they help you stabilize your finances, strengthen your investment portfolio and make progress toward your goals, you may have no problem covering the fees.

Learn more: How to Make a Financial Plan

Do I Need a Financial Planner?

If your finances are relatively straightforward, you may feel confident managing your money on your own or seeking one-off resources as needed. But working with a financial planner might make sense if:

• You feel overwhelmed by financial stress. That may be the case if you're trying to pay off debt or save for big financial goals like buying a house or saving for retirement.
• You've experienced a life change that affects your finances. This can include getting married or divorced, having a child, or experiencing a significant increase or decrease in income.
• You're looking for personalized financial advice. If you'd rather not take a do-it-yourself approach to managing your money, a financial planner can offer advice that's designed specifically for you and your goals.

How to Choose a Financial Planner

Working with a certified financial planner is probably your best bet because they've met rigorous standards to earn that designation. Here's a step-by-step guide to finding the right planner for you:

1. Clarify your goals. Ask yourself why you want to work with a financial planner in the first place. For example, if you're looking for investment guidance, you can search for a professional who specializes in that area.
2. Meet with potential planners. The CFP Board's search tool can help you find professionals in your area. Be wary of anyone who promises to transform your finances overnight—it could be a scam. Once you've chosen some potential planners, you can arrange to meet in person or virtually to see if they're a good fit.
3. Ask questions. Inquire about their credentials and prior experience, as well as their fee structure and whether they're a fiduciary. Also clarify if the services they offer are aligned with your needs.
4. Read reviews. Be sure to read online reviews and confirm any credentials they claim to have. For example, if they hold the CFP designation, you can run their name through the CFP Board search tool mentioned earlier to confirm it.

Alternatives to Traditional Financial Planning

If working with a financial planner doesn't feel like the right move, there are other resources you could lean on. Consider the following alternatives.

• Robo-advisor: These platforms use algorithms to choose investments for you based on your age, risk tolerance, income and financial goals. Robo-advisors can also monitor your investments and rebalance your portfolio as needed.
• Brokerage firm: A brokerage firm serves as the intermediary between investors and the stock market. You might opt for a stockbroker or an online investment brokerage—both can provide investment guidance and make trades on your behalf.
• Retirement account resources: Individual retirement account (IRAs) and 401(k)s may be structured as target-date funds. These age-based accounts are linked to your expected retirement age and will automatically become more conservative as you get closer to retiring.
• Nonprofit credit counseling: A credit counselor can offer basic financial guidance around budgeting, paying off debt and improving your credit. You can expect free or low-cost financial advice, which may be a good starting point if resources are limited.

The Bottom Line

Whether you should hire a financial planner depends on your situation and budget. It might be worth exploring if you like the idea of having a professional in your corner who can provide one-on-one guidance. They could offer the insights and accountability you need to reach your goals. But for some, the cost of working with a financial planner outweighs the potential benefits.

If you're looking for credit resources, you could sign up for free credit monitoring through Experian. You'll receive regular updates and tips for improving your credit health, which can go a long way when it comes to your finances.