7 Reasons Why You Haven’t Hired a Financial Planner – And Why They’re All Wrong

Many Americans choose to go it alone with their finances instead of hiring a certified expert. Hiring a financial planner is not yet part of our mainstream culture. Yet, if we are willing to pay a mechanic to change our car’s oil or a plumber to fix a leaky sink – even though we could accomplish both tasks ourselves – why wouldn’t we want to employ an expert when it comes to our money?

Here are seven common reasons why many choose not to hire a financial planner.

• “I don’t have money to invest.” That’s what my former co-worker told me. The truth is, she is contributing to her 401(k), and thus she has money she is investing. Without a financial planner, she will just choose her 401(k) investment funds randomly or through the help of another co-worker who is winging it. Is this a winning strategy?

• “My situation is quite simple.” This is what my friend told me the other day. She has a bank account, one old 401(k) with TIAA, and an independent contractor job. For starters, a financial planner can help her with the following:
  1. Invest her old 401(k) better. This may entail moving it out of a higher-fee fund to a lower-fee fund. This could mean thousands in higher gains.
  2. Recommend a higher-yielding bank savings account.
  3. Teach her how to budget smartly, to align her money with her values.
  4. Lower her tax bill by contributing to a SEP IRA.

• “I’m ashamed to reveal my financial situation.” You’re not alone. Everyone makes mistakes, including me. When I was studying for my CFA exam, I learned about stock options, and how one can rapidly make money. I soon realized it was also a rapid way to lose money. Find a firm that has a culture of meeting clients where they are. They exist.

• “My 401(k) and IRAs are doing fine, thank you.” But perhaps a financial planner who has a strong background on investing can help you do better. A study of the investment returns of 425,000 individuals revealed that the median annual return of those who got professional help was nearly three percentage points higher, even after fees.

• “I have a lot of things going on.” I get it. Our jobs are demanding. We have social obligations. But money is inextricably linked to our daily lives. We make financial decisions on a regular basis. When you choose a beverage to drink, you’re making a personal finance decision. You make decisions regarding your weekend plans, health insurance, 401(k), bank accounts, credit cards, vacation, apartment, job, engagement, children, parents…the list is endless. If you work with a financial planner, s/he can help you make more informed decisions that will hopefully free up space in your life.

• “I don’t trust a financial advisor.” I don’t blame you. Financial advisers consistently get the lowest level of trust in consumer surveys – the same level as a car salesman. This is due to the fact that close to 90% of financial advisors are actually salespeople. They legally do not have to do what’s in your best interest. This is why it is so important to find a fee-only financial planner. The organization NAPFA has highly trained professionals who are committed to working in the best interests of those they serve. Look for a CFP® professional. They have completed extensive training and experience requirements and are held to rigorous ethical standards.

• “It’s too expensive.” But have you asked yourself:

What does it cost to NOT have a financial planner?

If you make the following mistakes, it can be more costly.

So what do you think? If you have a financial planner, what was your main motivation for seeking one? If you don’t have one yet, what prevents you from seeking one?

About Alvin Carlos, CFA, CFP®

Alvin Carlos, CFA, CFP® is passionate about helping middle class professionals make smarter financial decisions. He is the CEO of District Capital Management, a financial planning and investment management firm for the everyday people. Alvin is a CERTIFIED FINANCIAL PLANNER™ practitioner and has a Masters degree in International Relations from SAIS-Johns Hopkins. In his spare time, Alvin enjoys swing dancing and Ultimate Frisbee. He also volunteers for Catholic Charities’ new Financial Stability Network, which helps low-income folks with their finances.

View all posts by Alvin Carlos, CFA, CFP®