What Type of Financial Advice Do I Need?

Financial Planning, Retirement Planning and Investment Advice are Different

Father and son reading their savings account statement.
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As financial planners, when we meet someone new, and they ask us what we do when we tell them we're financial planners they often reply with "Oh, what do you think I should be investing in right now?" This question drives us nuts. Financial planner does not mean stock broker, market timer, economics guru, or investment advisor. It also does not mean we have a working crystal ball.

There are distinct service offerings in the financial services world and if you think you might need financial advice you'll want to spend time understanding what types of advice can be bought, and who offers it.

Let's take a look at the three primary types of financial advice that you might seek; financial planning, investment advice, and retirement planning.

Financial Planning

Financial planning involves looking at your entire financial situation and laying out a plan to take you in the direction you want to go.

It involves looking at the type of mortgage you have (as well as all types of debt), your insurance needs and current coverage, company benefits such as 401(k) plans, stock options or deferred comp plans. Other items include family situation, career stability, spending habits, legal documents, and retirement plans. basically A good financial planner will look at everything having to do with your money and help you craft a plan of attack that will help you reach your goals.

A financial planner shows you what types of accounts to contribute to, and how over time, that should lead to a targeted net worth or account value size as you near retirement.

Investment Advice

Investment advice is just one small piece of financial planning. It has to do with where you put your money and can include picking funds inside your 401(k) plan, choosing stocks and bonds, and evaluating the risks of putting your money into a new business venture.

Investment advisors usually have a specialty such as managing bonds, stocks, creating and managing options strategies, or managing mutual funds using an asset allocation approach. Some investment advisors specialize in doing due diligence and screening other advisors to pick the right type of advisor for each category.

Always ask an investment advisor what their specialty is before hiring them. Be cautious of someone who says they invest in every investment type because no investment advisor can be good at everything. A good investment advisor knows when to seek outside expertise for certain parts of your portfolio.

Retirement Planning

Retirement planning involves a skill set that goes beyond basic financial planning or providing investment advice.

A retirement planner's job is to take all of your financial assets and create a plan that results in the delivery of reliable monthly income once you aren't working. They consider all of your assets including Social Security, pensions and 401(k)s, any part-time work you're doing, and how your spouse's income factors into the calculations.

A retirement planner will project out how much retirement income you may expect to have at what date, and which accounts to draw out of. They can show you how much you'll expect to pay in taxes and for health care costs. They show you how inflation may affect your spending needs, and what decisions will help put the future 80-year-old you in a more secure position.

Although other financial advisers will help you think ahead and plan for retirement, the retirement planner will go much deeper in the calculations and forecasting.

Someone who just tries to sell you a product or tell you what to do with your money is not a retirement planner. As you get near retirement you'll want to have a detailed projection of where your future income will come from.

Can I Have All Three?

Just because someone offers financial planning does not mean they offer investment advice and/or retirement planning, or vice versa. Make sure you understand the differences before you search for the service you need.

Some firms (often fee-only advisory firms) have expertise in all areas because they have a large enough staff, or resources with outside consultants, or expert advisors who have niche topic areas, which allow them to be competent across all areas. This type of firm can be a long-term home that will meet your financial planning, investment and retirement planning needs without you needing to make a change later in life.