By Heather Brown

MINNEAPOLIS (WCCO) — From paying for kids’ college to saving for retirement, there are a lot of big decisions about money to make. Many wonder if they should seek professional help. So, who needs a financial planner? Good Question.

“Most people don’t need a personal financial advisor,” Chris Farrell, an economics commentator at Minnesota Public Radio, said.

Farrell recommends a do-it-yourself approach that would include investing in low-cost index funds.

He says some people, though, can benefit from using an advisor during transitions in their lives, like retirement. In that case, an advisor would be able to talk with people about putting their money in the right place, estimating how long it will last and how much you should feel comfortable taking out each year.

He also recommends a financial advisor for people with lots of money, estate planning issues or a limited amount of time.

“One of the most important things, if you do hire someone to manage your money, that does not mean you don’t need to do anything,” he said. “You have to monitor it, you have to pay attention and you have to express yourself.”

Financial advisors can offer plenty of advice beyond investing from tax planning to estate planning to insurance to budgeting. Farrell says the good ones will make sure they understand what’s important to a client in terms of goals and risk threshold.

“Financially successful people don’t do this by themselves,” Bruce Helmer, a financial advisor, said. “It’s good for the super-wealthy, why is it not good enough for ma and pa down the street?”

But, financial advising can cost you. Some advisors charge a fee and others a percentage of the money they manage.

Nerdwallet looked at what 1 percent would cost over 40 years.

If a person starts at $25,000 and adds $10,000 per year, they would end up with $2.3 million in a low-cost fund (assuming a 7 percent return) after 40 years.

If a person takes the same amount of money and invests it in an actively managed fund, they’d end up with $1.77 million after 40 years. This is assuming an added 1 percent fee.

But, Vanguard has also looked at this topic and found financial advisors add 3 percentage points of value over time compared to investors who don’t use advisers.

Helmer said he encourages clients to ask their advisers to show them their advice is worth it.

“There is no way the average person can stay on top of everything,” Nicole Middendorf, a financial adviser who runs Prosperwell Financial, said. “It’s like a personal trainer. I’ll hold you accountable.”

Middendorf said she helps her clients stay on track when it comes to budgeting and saving. She said she can also point out options, like tax-free accounts, that people might have missed.

“It comes down to confidence and knowledge,” Robert Stammers, director of investor education and the CFA Institute, said.

Stammers said there are some people that only need a starting plan, but others who don’t know much about managing money and would benefit from more on-going advice.

Farrell advises people who are uncomfortable with investing to learn more about it. He has several recommendation for books:

  • The Random Walk Guide to Investing: Ten Rules for Financial Success (Burton Malkiel)
  • The Elements of Investing (Malkiel and Charles Ellis)
  • How to Make Your Money Last: The Indispensable Retirement Guide (Jane Bryant)
  • The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living (Mark Miller)
  • Get a Life: You Don’t Need a Million to Retire Well (Ralph Warner)
  • The New Frugality (Chris Farrell)

Heather Brown

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