What can a financial planner do for you?
- By Milt x_Zall
- May 25, 2001
The free-falling Nasdaq and the slumping Dow are sending many do-it-yourself
fed investors scurrying for advice from financial planners.
Clients of financial planners aren't immune to slumping markets. But unlike
go-it-alone investors caught up in high-tech hype or water-cooler advice,
most financial planning clients maintain a much more diversified portfolio,
so their investments aren't hit as hard when a particular sector or the
market at large tumbles.
Equally important, financial planners help keep you from overreacting to
the markets' vicissitudes. Many investors lose money by jumping in and out
of the market, either from greed or fear. A recent study by Phoenix Investment
Partners Ltd. found that mutual fund investors lost 20 percent of their
potential return by chasing performance. Financial planning clients are
more apt to stay for the long term, with the knowledge that although markets
go up and down, their investments likely will do fine in the long run.
More important, such clients have someone to navigate them even hold their
hand through the stomach-churning times by helping them select investments
most appropriate for their goals and time horizon.
But financial planners do much more than provide investment advice. For
one thing, they help you determine why you are investing in the first place.
For example, there's the story of a medical professional who came to a certified
financial planner because he wanted to earn a higher return on his portfolio.
Instead of immediately "crunching numbers" and reallocating the man's portfolio,
the planner talked to him about why he wanted to earn a higher return. The
man said he wanted to retire as soon as possible because the stress at work
was literally, according to his cardiologist, killing him. His plan was
to work longer hours, kick in more to his retirement plan, boost returns
and quit as soon as possible. Instead of looking for ways to boost return,
the planner recommended that the man cut back his hours and make his portfolio
slightly more conservative instead of more aggressive. Today, the client
is enjoying his work, and his blood pressure is down.
The investor could just have easily tried to boost returns on his own. Numerous
retirement calculator sites on the Internet would have told him what to
do and even where to invest. What they wouldn't have told him was what he
really needed to do: Readjust his goals and slow down.
Helping you define what you really want from your life is one of the major
benefits planners can provide for you. They'll ask, Do you want to retire
early, start a new career or business, or move? For example, one of the
struggles for many baby boomers is how to balance competing goals of funding
retirement, helping children pay for college and financially assisting elderly
parents. You won't find such answers online. Dealing with those matters
calls for a thorough review of your individual situation and making some
By clearly defining what you want to achieve, a planner can plot a course
that will take you where you want to go. Investing typically will be part
of that. But so will many other aspects of your financial life: insurance,
estate planning, income taxes and budgeting. All those elements must work
together for you to reach your goals.
A financial planner also can help you through other challenging times besides
slumping stock markets. With the counsel of a financial planner, families
can better handle such crises as a death in the family, a job loss, a disability
or a catastrophic illness. Planners can even help with planned life events,
such as a marriage, a divorce or the birth of a child. All of those events
have major financial implications that require prompt attention at what
often is a difficult time. A financial planner can provide a more objective,
independent and informed perspective than you can when you're operating
Another valuable service a qualified financial planner can provide is to
filter out all the "noise" surrounding finances today. Sure, the Internet
is loaded with information for the do-it-yourselfer, but that can be just
the problem: Which information is valuable, which is harmful or misleading,
and do you have the time and knowledge to sort it out?
Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser. He can be reached at [email protected].