“Why do I need a financial planner rather than a financial advisor or wealth manager?”
Imagine you decide to take an expensive European vacation and are confident you will have enough money to make your dream a reality if you save diligently for the next few years. You meet with a banking professional and find a high yield savings account that will ensure your money will work for you and enhance your regular monthly savings towards this goal.
You should be all set, right?
The truth is that “money management” is only a small consideration when planning such a trip. A “bucket list” vacation with multiple destinations has many variables, such as timing, modes of transportation, accommodations, sightseeing destinations, dining, and entertainment. If you start with the dollars and work backward to build your budget, you may not experience the trip of your dreams. You must carefully balance your desires and expectations with your financial limitations and build the financial end of your plan around the trip you want, rather than the other way around. It is possible to experience Europe on any budget (I once backpacked for six weeks on a $50/day budget) but do you want to sacrifice your dreams because of budget constraints that likely could have been avoided with some careful planning? In most cases, working with a travel professional will help you plan all the details to realize your ideal trip while giving you a fair assessment of costs. It is also beneficial to have that agent as your resource to help make course corrections if something does not go as planned on the trip.
Financial planning is not much different.
Certainly, there are many advisors who will look at your age, income, and expected retirement date and tell you how much money you will need to retire based on some rule of thumb or algorithm. Some may not give much thought to that at all. Their job is to manage your money and make it grow. They are essentially helping you to build your nest egg for your dream retirement. But without careful analysis and ongoing planning, how do they know how much is enough?
Financial planning, and specifically retirement planning, is designed to take a comprehensive look at all of the factors that go into a successful retirement and construct a highly individualized plan to get you there. A good financial planner is going to carefully consider your assets, liabilities, income, spending, risk management (i.e., insurances), retirement needs, retirement wants and retirement dreams before customizing a strategy that helps you realize the retirement that you have worked so hard for. Money management is just one component of that. Additionally, financial planning is an ongoing process that helps you to course correct, ensuring you stay on track, despite changes that will most certainly arise over time.
Interestingly enough, it does not cost you, the traveler, any additional money to use a travel agent. And in many cases, it does not cost much more (and sometimes less!) to use a fee-only financial planner compared to most money managers. Yet in both cases, the added value is priceless.