11 Reasons to Hire a Financial Planner

Personal Finance
young professional reading about why to hire a financial planner - lifewise

We’ve written before about the intangible benefits of financial planning and how it can be difficult for young professionals who have not gone through the process of building a financial plan to fully grasp its benefits. Which is why in today’s blog we’ll outline 11 reasons to hire a financial planner using real life examples of ways individuals have benefited tremendously from the planning process.

(1) Increased Coverage and Reduced Premiums

As part of the annual planning process, we help clients review all of their insurance policies, from life and disability to homeowner’s and car insurance. Recently we helped a client review his homeowner’s insurance policy and identified an opportunity to take a deeper dive. We enlisted the help of a trusted property and casualty insurance expert who was able to save him $800 in annual premiums, as well as identifying and fixing a major gap on the rental policy coverage he currently had in place with his own property and casualty agent.

(2) Let’s Clean Up Your Investments

When it comes to how individuals divide up their investments, it’s safe to say we’ve seen it all. Some look at their ten investment options in their 401(k) and put 10% in each fund, others look at the ones with the greatest return over the last five years and put all of their money in those funds. Needless to say neither of those is a good strategy. We recently reviewed an investment account for a prospective client who had nearly all of his money in three mutual funds, not realizing that while he was balanced (money in different funds), he wasn’t diversified because the three funds all invested virtually in the same companies (large domestic stocks). By helping him more broadly diversify his portfolio, he’ll be able to lose less during short-term market fluctuations, and ultimately make more money over the long-run.

(3) Ditch the Whole Life and Increase the Term

Oftentimes young professionals find themselves being approached by insurance agents as many young people do in fact need insurance. Unfortunately, young professionals also tend to find themselves being sold expensive whole life policies with features and benefits that aren’t necessary when a simple term policy would do. A prospective client recently came to us with a bunch of insurance policies. We reviewed them, explained the pros and cons of each of the policies and identified nearly $3,000 in annual premium savings if she canceled her current policies and simply replaced them with low-cost term insurance which better aligned with what she really needed in the first place!

(4) You Live in a Good 529 State

The landscape for saving for college can be convoluted, so it was no surprise when a new client came to us with a gold rated 529 plan he had started to contribute to. The issue, however, is that the client lives in Iowa and was contributing nearly $12,000 a year to a plan from another state, which left him in the cold for a state income tax deduction on his investment. By opening up an Iowa sponsored 529 plan and making future contributions into that account, the client was able to make an annual deduction on his state return up to $12,752 for contributions to both children’s 529 plans.

(5) Using an HSA to Make Uncle Sam Pay You

There’s nothing worse than having to pay Uncle Sam come April and that was the case with a client recently when he found out he didn’t withhold enough throughout the year and would owe the government nearly $600. Thankfully the client has a big chunk of money sitting in a savings account and we were able to coordinate maxing out his Health Savings Account (HSA), which hadn’t been done yet. This turned a $600 tax bill into a refund of nearly $500, all because the client transferred money he wasn’t using in savings to his HSA, which he can spend tax free on health care expenses and penalty-free in retirement.

(6) Getting Married? Let’s Time it Right

Many young professionals find themselves getting married and while for most individuals the timing of when you get legally married usually coincides with the day before or after the ceremony, you should pay attention if you’re getting married at the end of the year. That was the case for a client recently whose wedding ceremony fell on January 2. Thankfully, in coordination with their CPA, we were able to help determine that getting legally married on December 31 would save them nearly $5,500 in taxes by being able to file as a married couple instead of having to wait a full year to do so.

(7) Identifying Closet Index Funds

Would you pay Nordstrom prices at Walmart? Absolutely not! Actively managed mutual funds are paid to try and produce returns above and beyond a simple benchmark, while low-cost index funds simply charge a small fee to track a particular benchmark or index. Unfortunately, actively managed fund managers are increasingly doing what’s referred to as “closet indexing” where they track the index in an effort to minimize the chances of lagging the index dramatically. We had a prospective client come to us with a handful of mutual funds in his portfolio that were closet indexers. By moving to low-cost index funds, he was able to bring his expenses down from roughly 1.25% to 0.35% which translates to nearly $5,000 in savings on fees over the first five years on a $100,000 portfolio.

(8) Getting Stuff Done

One of the biggest things we hear consistently from clients is “you help us get stuff done and hold us accountable!” It seems too simple and most people don’t think they need it, but in the midst of busy lives as young professionals, it can be easy to fall into the trap of “I’ll look into life insurance tomorrow” or “I will review my investments next weekend.” And then 30 years happens and you’re still saying that. One of our greatest values—which is nearly impossible to fully measure—is in helping systematically work through financial challenges and making sure that if a client needs to increase their savings, they actually do! Much like hiring a trainer pushes individuals to show up to the gym at 6 a.m. in the morning, hiring a financial planner helps to ensure that every aspect of your financial picture is taken care of.

(9) Helping Clients Avoid Buying High and Selling Low

You may have heard the sage advice to buy low and sell high, yet in reality the “allure of market timing and temptation to chase past performance” can at times be incredibly tempting. This is where an advisor helps clients avoid the mistake of getting overly excited during the tech bubble of the early 2000s and inversely helps keep clients from panicking during the Great Recession of 2007-09. In a recent study by Vanguard, they estimated that an advisor’s behavioral coaching is worth an additional 1.5% in annual return which equates to nearly an extra $100,000 over 30 years in additional portfolio growth.

Fear and Greed - Carl Richards

(10) Your Interest Rate is How High?

It’s amazing even despite the low-rate environment we’ve been in for years now that many busy, young professionals still haven’t looked at refinancing their homes to lock in historically low interest rate. Thankfully we uncovered during an annual review meeting that the interest rate on a client’s mortgage was still in the 5% range so we helped coordinate with a trusted mortgage partner to secure an interest rate that would save $30,000 in lifetime interest payments.

(11) That is Way, Way, Way Too Much House

One of the often overlooked values a financial planner can provide is protecting clients from the big mistake, which often comes in the form of helping guide a client away from a major purchase far beyond their means. Take a recent example, of a new client coming to us looking to buy a home. The couple was hoping to afford a new home in the $800,000 to $1,000,000 range. They qualified for a mortgage that would support that size of home, but after further analysis, purchasing the home would lock them into decades of being house rich, cash poor. We were able to help guide the couple to a more affordable home of $750,000 that still met many of their needs and would give them the financial flexibility to travel, which they valued more than a big, fancy home.

The Big Mistake - Carl Richards

Be sure to stay tuned for future updates outlining the next 11 reasons to hire a financial planner! 

About Matt Cosgriff, CFP(®)

Minneapolis Financial Planner | Intrapreneur | Young Professional | Millennial Guru | Tech Aficionado | Traveler | Food Lover | Minnesota Wild Fan | Movie Quoter | Follow on Twitter| LinkedIn

New to Lifewise?

Providing the perfect blend of powerful technology and human guidance, Lifewise is geared toward young professionals searching for a better way to make wise choices and sound financial decisions. Backed by BerganKDV Wealth Management, Lifewise is supported by a team of CPAs, CFPs and CFAs who stand ready to guide you through every financial challenge and windfall.

Learn more

Related Articles

Questions? Contact us. We’re here to help.


3800 American Blvd. W.
Suite 1000
Minneapolis, MN 55431

Error: Contact form not found.