|You wouldn’t depart for an important trip without a clear idea of how to get to your destination — or at least without a GPS or map to show you how to get there. The same logic applies to your journey through life. You’re likely to get lost without a clear financial plan to get where you want to go, now and well into the future.
Financial planning is the process by which a person or family works with a financial professional to set goals, financial and otherwise, and to develop a plan for meeting them. A Certified Financial Planner™ (CFP®) is trained to develop a plan to serve as that map or GPS. And the CFP™ designation means they must adhere to a code of ethics and a fiduciary standard that require them to put their clients’ best interests first. To find a CFP® in your area, visit the Financial Planning Association’s national database at www.PlannerSearch.org.
Whatever you’re financial circumstances, it’s probably a good idea for you to consider working with a financial planner if…
1. You just had, or are expecting, a life-changing event: getting married, having a baby, going through a divorce, facing a death in the family, inheriting a large sum of money, starting or selling a business, preparing for retirement, receiving a life-challenging medical diagnosis — the list goes on. A financial planner not only can help assess how that life-changing event may impact your finances, he or she also can help you put a plan in place to handle that change with minimal financial disruption.
2. You say to yourself, “I’m making plenty of money, but I have nothing to show for it.” A financial planner can help a person map where their money goes, then develop a plan to spend it — and save it — more efficiently, notes Boston-based Certified Financial Planner™ Eric Roberge.
3. Just the word “finance” or “money” or “planning” gives you a headache. The cure for that headache often comes with seeing your entire financial picture more clearly, says Elaine King, a Certified Financial Planner™ in Miami, Fla. A Certified Financial Planner is trained to provide that clarity.
4. You have major goals you want to accomplish but lack the time and/or the know-how to develop a plan for how to achieve them. “A financial planner can take a holistic view of your financial situation,” explains Melissa Sotudeh, a Certified Financial Planner™ in Rockville, Md, “and advise you on whether to focus in on a particular goal, or whether you should be simultaneously working on multiple goals — as well as how you can actually manage to do this.”
5. “You are getting closer to retirement and have never paid attention to the allocation of your investments,” says Certified Financial Planner™ Jon L. Ten Haagen with Ten Haagen Financial in Northport, N.Y. The proximity of retirement often dictates a shift in how a person’s assets are allocated, so they’re better protected but still positioned to grow and provide income during retirement.
6. You don’t know what is in, or you don’t understand, your investment portfolio(s). A financial planner is trained to simplify the complex world of investing and asset management for their clients, says Sotudeh. “A planner can analyze your portfolio, explain it to you in plain English, and determine whether your current investments are appropriate for your goals and life situation.”
7. The stock market’s volatility sends you into an extreme state of agitation. This “may mean that you don’t have a real plan for your investments and just pick stuff at random to buy,” says Kristi C. Sullivan, a Certified Financial Planner™ in Denver, Colo. “You probably need a financial planner to help create a cohesive, diversified portfolio and keep your focus on long-term goals.”
8. You see the value of your assets dropping and are losing sleep wondering how the drop affects your retirement. Retirement planning is a long-term proposition that has little to do with the day-to-day movements of the stock market. So tune out all those financial shows and, for peace of mind, seek out a financial professional for an honest assessment of your entire retirement picture. They’ll help put market volatility in a proper perspective and help you prioritize what really matters in your financial life.
9. You’re working with a financial advisor who offers advice on investments but not on such other important aspects of your (financial) life as employee benefits, retirement accounts, college savings accounts, tax efficiency, life insurance and more. Unlike many investment managers and brokers, who may only be trained or inclined to focus on certain narrow aspects of your financial life, a Certified Financial Planner™ is trained to look at and plan around all aspects of a person’s financial life, notes Certified Financial Planner™ Michael McKevitt of Guillaume & Freckman in Palatine, Ill.
10. You and your spouse don’t share joint goals. Differences over finances are the cause of some 70% of divorces, according to King. Working with a financial planner “can help couples find common ground,” she says, whether it’s goals related to their children, items on their retirement bucket list, charitable inclinations and more.
Five more indications you could benefit from working with a CFP® professional:
11. You’re confused by the complex rules around Social Security payments and want strategies to maximize your Social Security benefits.
12. You’re struggling to manage a mounting burden of debt and accumulated bills but haven’t changed your spending habits.
13. Only one person in the family has a handle on household finances, retirement accounts, key financial documents, etc.
14. You’re consistently short of cash to cover your expenses.
15. You’re concerned about leaving a legacy for family members.
March 2016 — This column is provided by the Financial Planning Association® (FPA®) of Illinois, the principle professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process.