Should You DIY Your Financial Plan or Hire a Financial Planner? Here’s How to Decide
Can you manage your own financial planning? The quick answer is: absolutely! Technology has made it possible for almost anyone to handle their own investments and overall financial planning. From apps that help you budget to platforms that let you trade stocks, you’ve got a full toolkit at your fingertips. In fact, only about 30% of individuals work with a financial planner, while the rest try the DIY route.
But here’s the kicker: while you can manage your own finances, should you? According to the Vanguard Advisor’s Alpha study, those who work with highly trained financial planners often end up in a better financial position. This isn't just about investments; it’s about making smarter, long-term financial decisions that align with your life goals.
Financial Planners: Can Anyone Work With One?
There’s a common misconception that financial planners are only for the wealthy or those with a complex portfolio. In reality, many financial planners are accessible to a wide range of clients—regardless of income or net worth. They typically offer two types of services:
One-Time Project-Based Planning
Ideal if you need help mapping out specific goals, like buying a house or planning for retirement. You’ll pay a one-time fee for advice and guidance.
Ongoing Financial Planning
Perfect if you need continuous support and monitoring, usually charging either a flat fee or a percentage of your assets.
Bottom line? There’s likely a financial planner out there who fits your specific needs, no matter where you’re at in your financial journey.
What Does Real Financial Planning Look Like Today?
Forget the image of a pushy insurance salesman or a nerdy, number-crunching guy who throws jargon your way. Today's financial planners are all about creating value that goes way beyond investments. In fact, the real value lies in the planning—understanding what matters most to you and aligning your financial decisions with those priorities.
Here’s where financial planners really shine: they help you tackle complex, nuanced questions that can significantly impact your financial future, such as:
How do I balance short-term financial needs (like paying off debt or buying a home) with long-term goals (like retirement or college savings)?
What’s the optimal tax strategy for maximizing my wealth over time, considering factors like income brackets, capital gains, estate planning, and charitable giving?
How should I adjust my portfolio to manage risk in a volatile market while staying aligned with my long-term investment objectives?
What is the right withdrawal strategy during retirement to minimize taxes and ensure my savings last through my lifetime?
How do I plan for healthcare costs in retirement, considering rising medical expenses, insurance premiums, and potential long-term care needs?
When does it make sense to invest in opportunities like real estate, or other alternative investments without disrupting my core financial strategy?
These aren’t just about dollars and cents; they require understanding both your financial picture and the behavioral aspects that could influence your decisions. That’s where a financial planner’s expertise becomes invaluable.
Behavioral and Diversification Value: How Financial Planners Provide Real Impact
Managing money isn’t just about crunching numbers; it’s also about managing emotions, biases, and behaviors that can cloud our judgment. Financial planners don’t just help with investment choices—they provide behavioral coaching that can make a massive difference over time.
According to a Morningstar study, investors who work with financial planners often accumulate more wealth than those who go the DIY route. Why? Because financial planners help you avoid costly behavioral mistakes, such as:
Panic selling during market downturns (like the chaos during early 2020 when the pandemic hit).
Overconfidence in "hot" investment trends, like putting too much of your portfolio in high-risk, trendy stocks.
Failure to adapt your strategy when life circumstances change, which is inevitable over a long financial journey.
Here’s a real-world scenario: imagine the market takes a dive, and your gut tells you to pull all your investments out. A financial planner steps in and says, “Wait—let’s focus on your long-term goals, not today’s panic.” That pause keeps you from locking in losses and making a fear-driven decision that could derail your financial future.
But it’s not just about emotional support. Financial advisors are also trained to build portfolios that are diversified, ensuring your investments align with your risk tolerance, time horizon, and financial goals. This diversification means spreading your money across different asset classes—like stocks, bonds, real estate, and even international markets—to minimize the risk of a significant downturn in any one area.
The Power of Diversification During Market Volatility
Research has shown that diversified portfolios tend to weather market volatility much better. According to Vanguard’s study on diversification, a portfolio that balances stocks and bonds can reduce volatility by nearly 25-30%, compared to an all-stock portfolio. Similarly, Morningstar’s 2020 study found that during the COVID-19 market crash:
Aggressive, equity-heavy portfolios lost as much as 34% during the March 2020 downturn.
More moderate, balanced portfolios (a mix of stocks and bonds) saw declines closer to 20-25%.
This difference can be crucial during periods of market turbulence. A DIY investor might be tempted to chase high-performing, riskier assets—think tech stocks or cryptocurrency—without adequately diversifying. When a correction hits, these concentrated portfolios can experience dramatic losses. In contrast, a financial advisor works to ensure your portfolio is balanced between risk and reward, so you can limit those sharp declines.
Financial Planning: More Than Just Numbers
A financial planner’s job isn’t just to crunch numbers or help you pick stocks. Their real expertise is in helping you make decisions when the future is unclear and life throws curveballs. It’s not just about having a financial plan; it’s about having a guide—someone who knows the terrain and can adjust course when the unexpected happens.
Think of it like this: a financial plan is like a map. It’s helpful, but it’s static. Life, on the other hand, is dynamic, and things change. A financial planner acts as your guide, helping you navigate those changes as they come—whether it’s a job loss, a new baby, or an unexpected health expense. They’ll make sure your plan evolves with you.
Why Ongoing Financial Planning Matters
After you’ve crafted a solid financial plan, you might wonder: why continue working with a financial advisor? The reality is, a financial plan isn’t something you set and forget. It’s not a static document; it needs ongoing adjustment and attention. As life evolves—whether it’s a job change, new family members, or shifts in the economy—so must your financial strategy.
This is why ongoing financial planning is so crucial. It’s the difference between simply having a road map and having a guide who can adjust that map as the landscape changes. While a map might point you in the right general direction, a guide will help you navigate the bumps and detours along the way, ensuring you stay on track toward your goals. Continuous engagement with your financial planner allows you to adapt, pivot, and fine-tune your plan as life’s circumstances inevitably shift.
Should You Hire a Financial Planner?
So, should you hire a financial planner in the first place? Now that you understand the importance of ongoing financial planning, the question becomes: why hire one, especially if you think you can handle things on your own?
The answer lies in the value beyond the numbers. Financial planning isn’t just about creating a plan—it’s about managing your finances in the context of your life. A financial planner provides more than just technical advice; they offer an unbiased perspective, accountability, and emotional detachment. This is vital because financial decisions often come with emotional weight, and those emotions can lead to costly mistakes.
You don’t hire a financial planner because you’re incapable of handling your own money. You hire one because they’re not emotionally invested in your financial decisions, and they can offer a second opinion when you need it most. Whether it's navigating major life changes, adjusting your retirement savings strategy, or exploring new financial opportunities, having a trusted advisor to lean on can make all the difference in keeping your finances on track.
Ready to Redesign Your Financial Future? Let’s Talk!
At Redesign Wealth Planning, we focus on more than just numbers—we help you align your financial strategies with your life goals. Get in touch with us today to schedule a free consultation and see how we can help you design the financial life you deserve.
Redesign Wealth Planning is a Registered Investment Adviser in the state of Alabama. Advisory services are only offered to clients or prospective clients where RWP and its representatives are properly registered or exempt from registration. "Likes" should not be considered a positive reflection of the investment advisory services offered by RWP.
Julie Jenkins, is an investment adviser representative of Redesign Wealth Planning. The firm is a registered investment adviser and only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
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