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Do you really need a financial advisor?

Do you really need a financial advisor?

October 11, 2023

The answer is yes, maybe, and it depends.  So let's walk through those.

In a recent article, I talked about the difference between tax preparation or tax prep, tax planning, and financial planning.  Here is a link to that article if you missed it.

Does everybody need financial advice?

The question is, do you make financial decisions? If you do, then you need financial advice.  Notice I didn’t yet say advisor, just advice.

That advice may come from your own experience and training or from someone else or a combination of sources.

Then especially do you make financial decisions that involve tax consequences? Odds are yes, because virtually every financial decision involves tax in some form or fashion.

Whether it might be a pretax or after-tax choice, you're choosing to do something financially before taxes are withheld, or you're using money after you've paid tax and using whatever is left over.

Tax is almost always involved in some form. Whether you actually need a financial advisor or not, depends on a lot of things. The complexity of your situation and your ability and willingness to research and make choices yourself. There are a lot of people that are very comfortable making financial decisions.

They are comfortable with the research. They're comfortable with the tasks that they need to do after doing that research and basically make their own decisions. If that’s you, I congratulate you and wish you the very best in the future.

So, does everybody need a financial advisor? In all honesty, probably not.  A big part of the question though, is are you willing and able to make those decisions and do the research and then do the follow on actions to put your research into action?

What if you’d rather not do that research or need assistance with the decision making or implementation process and considering working with a tax and finance advisor?

What is a financial advisor or financial planner?

It's a very broad term depending on who you ask. Many people think it’s just someone who makes investment decisions but I think it’s more broad than this.

There are some licenses involved to be able to call yourself a financial advisor and charge for advice and I do have that license. However unfortunately, there are some people out there who do not have those licenses, and it's a fairly loosely defined term and some people claim that title without actually being licensed.

A proper financial plan should obviously involve tax planning. It should involve estate planning, college planning and looking at your risk management (insurance) needs.  Issues that go far beyond simply choosing which investments to make.

For those that are making their own investment choices are you also looking at your estate plan? Are you looking at your insurance needs? Are you looking at your family college planning needs? Are you looking at your legacy issues for what happens with your resources that you leave behind when you take that last breath?

Considering that taxes are one of your largest lifetime expenses how are you doing long term tax reduction planning so that you pay less in taxes and keep more in your family?

Financial advisors - do you need one? Yes, maybe and it depends.

It depends on a lot of those things that we just talked about above. Would you like to have somebody to consult with?  Would you pay for the convenience of freeing up your time?

Some people recognize and readily pay for good advice.  Others seem to think that advice should be free.  It is, you just have to go research it.  Almost everything that can be learned is on the internet somewhere. You just need to invest the time to do the research.  As I tell some folks, free advice is spelled GOOGLE.

Do you do your own tax return or have someone do it so you can free up your time?  Do you change the oil in your vehicle or have someone do it even though you know how to do it? 

That’s essentially outsourcing for convenience so outsourcing your financial services can fall into that same logic.  Of course, whoever you work with should very much be asking you what your goals are along with other very important information about your financial life.

Naturally I’m going to take the position that whoever is working with you on your financial plan should be helping you with your tax plan instead of sending you off to talk to your tax return preparer which we know may not include any planning in their tax prep services.

If they are telling you they can’t, won’t or not allowed to provide tax advice then consider if you really are getting the help you need.

Sometimes a good financial advisor can be a voice of reason.   Many poor financial decisions are based on emotion and a helpful advisor might be there to help guide you through that decision making process.

While no one including financial advisors can predict the future let’s look back to early 2020 as an example.  In early February 2020 the stock market was at all time highs, 45 days later it had experienced a significant tumble. 

Its easy to look back now with benefit of hindsight but even back then many people were making emotional decisions to move to cash after the market had fallen and were fearful of the unknown future, whereas others were trying to find cash to buy while the market was lower than the recent past. 

Those who sold after they had taken a tumble and waited until the market recovered basically took permanent losses in their long term financial goals.

Emotion can play a large part in financial decision making and many times emotions are the enemy of wise financial decisions.  Having a tax and finance professional as part of your financial health team can remove or at least mitigate some poor emotional financial decisions.

Another benefit of an outsourced tax and finance professional is the breadth of experience.  We are not all knowing and I tell folks I only walk on water when its frozen.  But across the tax, accounting and financial planning folks I help, I get to see people early in their career, those whose careers are in the past and everyone in between. Those who own businesses and those who get a regular paycheck and those deciding to transition from employee to business owner.

You get to see your situation and maybe those you talk to about it and while that’s valuable you probably don’t get to see a couple of hundred situations every year.  Quite often those help provide guidance to your situation so having a tax and finance advisor on your team can help bring the benefit of experiences of many others including their poor decisions so you don’t make those same decisions.

So to wrap this up, if you think it’s time to get someone on your financial team to help with long term tax planning and financial planning or not sure if you are getting that now let’s set up a no pressure introductory call and see where that conversation goes.  Use the link below.

I’m not the right fit for everyone and not everyone is the right fit for me, but if you still read these newsletters after a few years of publishing them, I’m assuming I’m saying something that is helpful for you so let’s have that call very soon.  If you know someone that could benefit from these weekly articles please forward to them or better yet have them visit the website and sign up so they get them too.


The information in this and other articles is intended to be educational in nature only.  Not tax, legal or investment guidance for you specifically.  Each person’s situation is unique and you must seek appropriate professional guidance that can address your unique situation.