09 Aug I have trust issues, but should I hire a financial planner?

Q. My investments are doing a little better. I’m mostly in ETFs. I really don’t want a financial planner – I have trust issues, I admit – but really, how much better could a planner do than the broader market?
— Unsure

A. Financial planning takes into account much more than your investments.

It looks at your overall money picture, including your investments, yes, but also tax, estate and insurance planning, your spending plan, projections for what you can afford to spend in retirement and much, much more.

Most people would benefit from having a financial planner, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

“Financial planners do so much more than just manage your investments,” she said.

For example, they can help with family wealth planning by analyzing your current estate plan and concerns. They can also consult with your estate planning attorney to make sure you have the needed documents, including a will, power of attorney and healthcare power of attorney, but also look at what planning you may need with trusts, she said.

In terms of retirement planning, Kane said, a planner would analyze your income needs now and in the future, help you with budgeting and your savings goals and help you create a plan to get you from where you are today through retirement.

“Financial planners can help you understand if your spending goals are appropriate to your resources,” she said. “For example, you may want to retire at 55 and spend $100,000 per year. If your resources don’t support that, your financial planner can help you see potential options if you save more now, work longer, or spend less in retirement.”

They can also help with tax planning by highlighting opportunities to maximize tax reduction strategies, consulting with your tax preparer and staying up on tax law changes that could affect your plan, she said.

For investments, they would review your investments and design a personalized portfolio appropriate for your needs. Then they would monitor your investments and “provide behavioral coaching to help you avoid making emotional financial decisions.”

They can also help with what she calls “protection planning,” which includes insurance.

“They can help you determine if you have the appropriate type and level of coverage for your current situation,” she said. “For example, a young family with one parent working would benefit from life insurance. If the working parent died, the surviving parent would have resources in place to help replace income from the working parent.”

“You put faith in a doctor to help keep you healthy. The same holds true with a financial planner/advisor. They help with your financial health,” she said.

You said trust is a concern with turning over your investments to a financial planner.

Kane said you’ll want to vet anyone who you work with to make sure that they’re a good fit for you and your needs.

There are different types of financial advisors and planners. Do your research. You’ll want to understand the types of designations, she said, calling the Certified Financial Planner designation the “gold standard” in planning.

Part of the research should be to understand how the planner is paid, she said.

“Fee-only advisors receive a percentage of the assets that they manage for you,” she said.

Then there are fee-based advisors, who receive a percentage of the assets that they manage for you and commissions if you buy certain products such as life insurance.

And then there are planners who receive an hourly fee, charging you to create a financial plan rather than get a percentage for asset management.

You should ask if any potential advisor is a fiduciary.

“A fiduciary must put your needs and best interest in mind when making recommendations,” she said.

You should ask an advisor about their investment philosophy, what kinds of investments they will use for you and what kinds of clients they work with.

“You’ll want to meet with someone who has experience working with clients who have similar net worth, similar life stage, etc.” she said.

It’s important that when working with an advisor, you have access to your accounts on the custodian’s website (such as Schwab) so you can see your investments, transactions, statements and performance.

“Never make a check payable to the individual advisor. Funds should be made payable to the custodian for your benefit,” she said.

Also be sure to see if the planner has any actions against them on the websites of the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).

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This story was originally published on Aug. 9, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.