What would a financial planner / advisor do for me? Do I need one?
August 31, 2020 2:36 PM   Subscribe

I've never had a financial advisor or financial planner and I'm not sure I need one. I'd like folks to read a bit about my situation (below the fold) and either (A) tell me I'm fine and can continue without a financial planner / advisor, or (B) if you think I do need one, tell me some specific things they would help with.

Do we need a financial advisor / planner? My wife and I are both 40-ish and have high-paying jobs. We have a rainy day account with several months of expenses; we also have 401(k)s and a joint non-retirement investment account. Between all the contributions to these various accounts, we save about 20% of our pretax income most years. Due to her job, we basically can't trade individual stocks (to avoid the appearance of insider trading), so we are stuck with mutual funds and ETFs. We own a house and we don't currently have any kids (if we do in the future, I could see that changing the equation).

My impression is that financial advisors / planners (nb: I don't fully understand the difference between them) basically tell you how much you should be saving, and what you should invest it in. In terms of the amounts, I think saving 20% of income is on the high end of what's usually recommended, and anyway I'm comfortable using various tools (such as Monte Carlo simulations) on my own to verify that our current savings rate is on target. As to investment options, as I said our options are limited and anyway we're satisfied with low-fee index funds in various asset classes.

So do we need a financial advisor / planner? If so, which one of the two? Also, why specifically? Of course I would be happy to have our current decision reaffirmed, but I am aware that is biased thinking and that's why I'm asking outsiders. Thanks in advance.
posted by Joey Buttafoucault to Work & Money (7 answers total) 5 users marked this as a favorite
If you've got a tax person you're happy with, I think that's the most important part of all of this, just to make sure you're up on all the changes to the tax code that you might be able to take advantage of. If you're comfortable running your own simulations and are already saving well-above the national averages, I think a person like this could only really serve you if you were contemplating a big life change (i.e. "One of us wants to leave their job, can we afford to do this" or "We want to buy a house that costs more than this one, how can we get more liquidity in order to do that?") and if that were the case there are a lot of people who offer basic "Pay one time and we'll give you an overview" types of check-ins which are a much better deal for most people than "Take a percentage of your assets and maybe tweak a few things" people. I've got a more complicated situation (need to take distributions from IRAs and investments in order to do this, that or the other) and I'm happy with my financial advisor but if my life were simpler I would not hesitate to not use him.
posted by jessamyn at 2:56 PM on August 31, 2020

I'm in close to the same boat as you, and I feel pretty comfortable without a financial advisor/planner. They might be able to help assess particular strategies like a backdoor Roth IRA, which can reduce taxes over the long run, though you can obviously do that yourself too. But I think as long as you've got a good savings rate and have your investments appropriately diversified given your goals (like, do you want to retire in 5 years or 30?), you're probably doing just fine.
posted by burden at 2:59 PM on August 31, 2020 [3 favorites]

In terms of the amounts, I think saving 20% of income is on the high end of what's usually recommended

It depends on exactly how much you make, whether you're eyeing retiring early, and whether there's any special things that you're saving for. If you're both saving $20k+/year and plan on working until 65, that'll give you a very solid nest egg.

In general, it sounds like you've got your head on your shoulders financially. Would spending a few hundred getting a second opinion be worth it to you? Maybe, maybe not. Mostly they might be able to point out a specific tax strategy that you might not be aware of, from the sounds of it.

I don't think it'll be all that helpful now but maybe around 55 it might be helpful to start figuring out a draw-down strategy and early retirement options.

do we need a financial advisor / planner? If so, which one of the two?

The important thing is that they're a fee based fiduciary.
posted by Candleman at 3:05 PM on August 31, 2020

I have a couple of friends who are financial advisors, and I would generally suggest one to one of two people: someone who has a specific goal that they're not sure if they have enough/ how much is enough/ how to save enough, or someone who cares about not just being in good shape but really maximizing their situation.

I have a couple of friends who are financial advisors, and it's not mostly about what specific fund or stock to invest in. It's about things like, are you getting everything you can out of your potential benefits package? Based on my goals, what KINDS of funds would I want to invest in? My one friend actually specializes in knowing the benefits of a couple of the biggest employers in her area, so she can help you figure out if you're using your benefits to their fullest.

She basically works with people once or twice a month for a couple of months, and then once or twice a year after that. So, is your insurance set up in a way that really fits your needs and gets you the best deal? If you aren't sure if you're having kids, what's the most tax-advantaged way to set up your savings that gives you the flexibility to move them? Do you want to work at this job forever? How much can you save now and how much can you afford to live on if you become a stay at home parent?

If you feel like you're on target for those things, you probably don't need one. I'm in mostly your situation, and she has told me she doesn't think I need an advisor; the seat of my pants is more my style, and my pants are conservative enough that we're saving about the same as you, in good solid funds, and we're pretty much fine.
posted by gideonfrog at 3:35 PM on August 31, 2020

Their merits ended up being covered pretty comprehensively on this previous question.
posted by caek at 3:39 PM on August 31, 2020

I'm of similar age, situation, and financial fluency as you. I don't think you need one (often).

The place we got meaningful value from those types of services was for estate planning. It turns out that ideal estate planning varies quite a lot by state, and we've moved a lot, so they've helped a few times.

Otherwise, they've offered us advice that we already knew (save aggressively; structure with fund 401k / Roth mega backdoor / HSA / IRA / 529; invest in some mix of low-cost funds and rebalance periodically; etc.. the exact type of thing you're talking about in your post).
posted by whisk(e)y neat at 3:56 PM on August 31, 2020

We’re 55, have no kids, and like many GenXers, don’t have much in our retirement accounts. Our fee-only financial planner ran an elaborate spreadsheet and said “if you want to retire at 67 and have a lifestyle similar to now, you need to max out your 401(k) and save an extra $X a year in a tax-advantaged investment account.” (In addition to the 6-months salary liquid savings we already have.) In addition, she talked to us about life insurance, wills, and other estate planning tasks.
posted by matildaben at 5:44 PM on August 31, 2020 [3 favorites]

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