Do You Really Need a Financial Adviser?

If you find yourself in a situation where you need financial help, it may be tempting to simply look for a financial adviser in your area and turn the problem over to them. However, before you jump on that option, you should ask yourself an important question: Do I really need a financial adviser?

Let’s start by looking at what a financial adviser actually does.

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    What is a financial adviser?

    A financial adviser is a broad term referring to any person who can help you manage your money. What does a financial adviser do? They may help you with investment decisions, resolving tax issues, and many other things — if it’s a financial consideration, there’s likely a financial adviser who can help.

    The term “financial adviser” is generic, and technically anyone can call themselves a “financial adviser,” including some shady people. To be sure you’re dealing with a reputable one, check their certifications. One key certification to look for is whether they have passed their Series 63 and 65 exams, which most states require before an adviser is legally allowed to make certain moves on behalf of a client.

    What about a financial planner? 

    A financial planner is a specific type of financial adviser. Financial planners are people who are specifically charged with helping their clients create a plan to meet their long-term financial goals.

    How is that different from a financial adviser? A financial planner would not necessarily be a good choice if you need financial help while trying to resolve an immediate financial difficulty, such as resolving an imminent tax situation. You would want a tax-focused financial adviser for that.

    Think of it this way: If the situation you want resolved is a long-term situation, such as long-term investments, planning your estate, or other matters that won’t actually resolve for more than a year or two, a financial planner is the type of financial adviser you want. If your situation is more immediate, like a complex tax situation or a confusing inheritance, you would want a different type of financial adviser more suited for your immediate situation.

    “Financial planner” is also a generic term. Before hiring one, you’ll want to make sure that they’re certified. A key certification for financial planners is the Certified Financial Planner certification. You can specifically search for Certified Financial Planners using the CFP website.

    [Read More: What a Good Financial Planner Does and Doesn’t Do]

    When is a financial adviser useful?

    Here are three common situations where you might need financial help and might find a reputable financial adviser useful.

    Complicated tax situations

    For the vast majority of Americans, filing taxes is an easy matter. For about 70% of American households, taxes are so simple that they can be handled by filling out a free online form in just a few minutes. Even if you’re not in that group, most tax situations are easily handled by the IRS’s Free File Fillable Forms.

    It’s only when you’re facing more complex situations, with different businesses and lots of different income streams, where you might need help from a financial adviser to get things straight.

    Complex estate planning

    For most people, the most difficult part of estate planning is just getting started. Most Americans have relatively simple estates that can be handled well with just a few documents, and everything you need to know is just a few Google searches or a trip to the library away.

    Things get more difficult if you have a large estate, unusual wishes, or a large number of heirs. In those situations, you may want to contact a financial adviser to make sure that your plans are clear.

    Investment planning for large amounts

    For smaller amounts, the benefits from hiring a financial adviser are likely outweighed by the costs. While they’re likely to improve your investments to a degree, the expense incurred with a financial planner handling a small amount of wealth may eat up much of what you gain over simply doing it yourself.

    Financial advisers become helpful when you have a large number of assets to consider. If you have enough assets that the estate tax is becoming an important consideration (say, $10 million or more), it may be worth discussing matters with a financial adviser or financial planner. For smaller amounts, it’s probably worth your time to at least attempt to manage your investments yourself and only use an adviser if you have difficulty.

    What’s the alternative?

    The truth is that most financial planning decisions are surprisingly simple. Many financial decisions seem complicated because simple concepts are hidden behind complex-sounding jargon. They also seem risky because media coverage of financial issues tends to focus on very risky investments because they’re exciting, but most financial options are actually relatively low risk and dull. Most ordinary financial situations don’t need outside advice.

    For most financial situations that ordinary people face, you only really need two things, neither one of which requires a financial adviser.

    A small amount of learning

    The first element is learning. Investing the time to really understand what your options are doesn’t require a financial adviser. It just requires some time to sit down, read a few documents, and use Google to help you figure out what some of the jargon means.

    If you don’t know where to start, simply start with a beginner’s guide to whatever financial topic concerns you. For example, if you’re trying to get started with understanding your options for saving for retirement, you might read The Simple Dollar’s guide to retirement planning.

    You should always read multiple guides on an issue to get multiple perspectives, so turn to Google to find other beginning guides on that issue, or go to your local library and check out an introductory book on the topic (the “For Dummies” personal finance books are generally quite good for beginner’s guides, for example).

    A simple plan

    If you read a few beginner’s guides on your financial concern carefully, making sure that you really understand them, you’ll find that most of them walk you through the process of coming up with a simple plan that works for your situation. Most guides will help you customize it for the nuances of your life, and since the vast majority of people have relatively simple financial situations, you’ll usually be able to come up with a simple plan that works for you.

    For example, if you’re concerned about saving for your children’s future, you might start by reading through our guide to saving for your child’s college education. This would point you toward some concrete steps you should take, such as opening a 529 college savings plan and using automatic payments to keep the plan on track. How will you afford it? You might start with these 20 ways to painlessly cut your monthly budget.

    That’s really all you need. Save the financial adviser for when you run into exceptional and difficult situations that go far beyond what you can pick up from your own learning.

    We welcome your feedback on this article. Contact us at with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.