Have you ever wondered why so many people use a financial planner? Why pay another person to help you manage your finances when you can just do it for yourself, right? Well, if this is what you’re thinking, then you’re not exactly understanding why people choose to use a financial planner or the benefits they offer.
In this article, we will give you an overview of what a financial planner does and why so many people choose to use these professionals to help them with their finances.
What is a financial planner?
A financial planner is a professional to whom clients turn to develop personalised plans to help them achieve their long-term financial goals. Although the role of a financial planner is often considered interchangeable with that of a financial advisor, they share many similar functions. However, financial planners use a more holistic approach to get results.
Is hiring a financial planner worth it?
Deciding whether to hire a financial planner depends on your situation. If you’re knowledgeable about finance and investing and just want to grow your wealth, you might not need one. However, if you’re unsure about investing or understanding the financial markets, a financial planner could be valuable.
Additionally, if you have a complex financial profile with multiple income sources, various assets, and tax requirements, hiring a financial planner might be a smart move.
Here are some reasons why hiring a financial planner is beneficial:
1. When saving for retirement
In Australia, there are various forms of retirement savings. However, the most common is superannuation, which is a compulsory system that requires individuals to save for their retirement. So, if this is compulsory, why do you need a financial planner?
A financial planner would be able to work out the best percentage of your salary that should go to your retirement savings. They’ll do the research, factor in the benefits, and work out the ideal amount for you to retire at your preferred age. They’ll even factor in the estimated value of that amount based on inflation.
2. Managing your retirement savings
When it comes to receiving your retirement after the term is complete, your financial planner will help you distribute it accordingly. They’ll advise you on the best solution to distribute your savings and possible opportunities to reinvest your money. If you withdraw a large amount of your retirement savings in one go, there can be significant tax obligations. In this case, your financial planner will do everything he can to lower this result.
Saving for retirement can be challenging, especially since it feels like the cash actually isn’t yours, and if you touch it, you’ll incur penalties. But in the end, when you receive it all in bulk, there might be so much that you don’t know what to do with it. That’s why having a financial planner helps. When it comes down to using all the money you’ve accumulated, they’ll help you manage it accordingly.
3. To advise on investment opportunities
Aside from helping you plan for retirement, a financial planner can also advise you on other investment opportunities.
4. To plan effectively to achieve financial goals
The main role of a financial planner is to help you plan effectively to achieve your financial goals, whatever they may be. Say, for instance, that you want to buy a house within the year. A financial planner will help you consider ways in which you can achieve that goal by saving or investing.
5. To help prepare for unforeseen circumstances
Tragedy can strike a person within the blink of an eye, causing their whole lives to change. Whether it’s the loss of a loved one or a disability, financial planners help families plan for these situations well. They’ll offer insurance products like life insurance, disability insurance, or even loss of employment coverage. They’ll help you plan for the worst.
How to choose the right financial planner
Finding the right financial planner for you does not have to be a complicated task, but you should never agree with the first person you meet with. Here are some helpful tips to help you find a professional financial planner:
1. Find someone who understands you and your goals
You want a financial planner who will strike a good balance between protecting your investments, advising you on the best course of action when they see you making a wrong move and supporting the decisions you make with your money.
2. Get reliable referrals from people you know
We suggest looking for a financial planner through word of mouth. Ask family and friends about who they use. By getting personal recommendations, you can sift through your options and find a planner who fits the mould you’re looking for.
3. Do your research
While having contact with friends, family, and colleagues is helpful in finding a good financial planner, it’s important to do some research by yourself. By researching different financial planners, you’ll get a good idea of their roles and responsibilities, what you’d expect from one, and what red flags to look out for.
Final Thoughts
Hiring a financial planner isn’t for everyone and it is possible to invest your own money without the aid of a planner. But if you’re not too clued up with investments and are unsure of how to start investing then working with a financial planner would be your best option.