Financial Planning: Not Easy
Why hire a financial advisor? Developing a financial plan is not a job that you can easily do yourself. There are so many choices of investment vehicles, tax strategies and life plans.
It’s hard enough to decide which is right for you, and the game changes every day. Financial planning is a simple process if you have a highly qualified and independent advisor helping you with it.
As a financial advisor, I find it a constant challenge to keep my clients properly informed. This is not an easy job at all.
Many of the ideas behind financial planning are still relatively new, and as the field grows, it seems to get more complex. The decision-making framework keeps changing.
The laws regarding taxes, retirement plans and estate planning are in a perpetual flux. In 2001, the government overhauled the U.S. tax code. In 2003, they did it again. Both sets of tax laws are loaded with provisions that keep the laws and what you need to know for planning purposes changing.
The financial planning marketplace is very different than it was just a few years ago. In just the past 15 years, Roth individual retirement accounts, exchange-traded funds, 529 college savings plans, Coverdell Education Savings Accounts (Education IRAs), Series I bonds, Treasury Inflation-Protected Securities (TIPS), separately managed accounts (SMAs), hedge funds and online trading all either started or reached mainstream acceptance.
All of these offerings greatly increased the options available for consumers, and freedom of choice is a great thing. Unfortunately, choosing wisely is difficult, and sometimes having so many options makes it harder for people to figure out what to do. This is why it helps to have a seasoned specialist in your corner.
Timing is also crucial. When the times change, so does your investment allocation. For example, back in 2010, TIPS Treasuries were a great bet because many feared inflation. TIPS and mutual funds based on them were rewarding investments.
But then inflation fears receded, and since 2011, TIPS are such a great idea. Similarly, gold rallied in the wake of the financial crisis and loose monetary policy that followed. Now, gold is falling for a fifth straight month.
Advisors do this research every day so you don’t have to. They can recommend an investment plan that fits with the times as well as your goals and financial situation.
Do you have the time to educate yourself? There are countless books on personal finance, but they don’t have all the answers for you. Generally, the popular books about financial planning and investments are focused on investing in stocks or mutual funds. Some just preach the value of saving and budgeting as if that was enough to build wealth. Others simply offer tips on a specific subject like taxes or estate planning.
Not a single book in the library can speak to you and tailor investment advice for your situation. These books are geared toward people who want to do everything on their own. Not everybody has the time, confidence, knowledge and ability to go it alone.
There is a fire hose of information out there. The problem is finding the time to piece together what is the relevant information for you. Can you figure that out? I don’t think most people have the time or the right skills, and if you think you are qualified, you are probably fooling yourself.
I think your efforts are more likely to be fruitful if you find the right financial advisor who can handle your investments while you focus on your life and career.
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Michael Garry, CFP, is managing member of Yardley Wealth Management in Newtown, Pa. His website is http://www.yardleywealth.net/
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