Why More People Are Getting Professional Help with Their Finances

Something’s going on with money, and it has been for the past few years. The next time you step into a financial planner’s office, look at who else is in the waiting room. More people in their 30s and 40s. Young families deciding how to save for college while simultaneously working off their student loans.

Professionals who just landed their first big promotion and want to ensure that they don’t mess it up. Even some still working on their debt but want to make certain they’re on the right track.

The notion that financial planning is only for rich retirees or Fortune 500 executives, it exists much less than before. Furthermore, statistics show that more Americans are hiring financial advisors than ever before, and for all the right reasons. Yet why the shift? Why are those who never thought they needed professionals suddenly seeing value?

People Tapped Out on DIY

For a good amount of time, everyone was doing it themselves. Apps at one’s disposal to invest money. Online calculators boasting results determining how much money should be saved by which age. YouTube channels teach everything from index funds to backdoor Roth conversions.

And don’t get me wrong, these resources are incredibly useful. They’ve opened a world of financial literacy that generations before were never educated on, on how to just get by. But there comes a point where people would get enough equity into their financial endeavors that they’d realize how much they didn’t know. Basics are easy. Creating an actionable strategy that involves taxation, insurance, estate planning, investment allocation, and long-term goals spirals out of control very fast.

It’s one thing to know how to change your own oil. But it’s another to know how to rebuild your engine. One’s a practical skill; the other demands expertise most people can’t afford to acquire.

Life Became More Complicated (So Did Finances)

The decisions people need to make about money now are legitimately more complicated than those two generations ago. Generationally, people had pensions, which created their retirement destinies; everyone else now needs to save on their own (401k, IRA), with ultimate decision-making power over their long-term lifestyles.

Healthcare costs have surmounted the competition. HSAs and long-term care insurance become inevitable decisions. Student loans create opportunities to pay student loan debt vs. additional savings; the real estate market, in many areas, creates homeownership/home equity plans with a difference. Tax implications are fluid, most change every year, yet without experts, people take for granted potentially great planning opportunities.

To top everything off, many now operate their own finances in addition to their elderly parents and young kids; at a certain point, this makes professional guidance attractive. After all, those exploring financial planning winter park residents and the like often find that having one person who stays on top of all these moving parts takes away massive amounts of stress!

Cost-Benefit Margins Changed

Here’s something that’s rarely talked about: the cost of making financial mistakes has grown exponentially; simultaneously, the cost of obtaining professional help has become more equitable.

Missing the boat on Roth conversions means paying thousands in taxes over one’s lifetime. Taking money out at a down-turned market means one has to wait years for retirement plans they’ve missed good opportunities on. Mismanagement of investment structuring for tax-saving purposes means leaving money on the table every year. These aren’t small mistakes, these are mistakes that aren’t caught until either it’s too late or one’s retired and many moons spent in deliberation.

Simultaneously, the financial planning world opened its doors. Fee-only planners who’ve charged hourly or flat fees project that anyone can ask for help, even if they don’t have portfolios over $250K. Even those who take percentages off have become increasingly competitive.

When people start running the numbers as numbers meaning something, they often determine professional guidance is self-funded through increased investments, saved taxes, and avoided costly mistakes.

Emotional Decision-Making Was Made More Apparent

Recent years made everyone well-versed in investment psychology; without even having to read a book or partake in a seminar, everyone realized how confusing it is when markets decline, and it becomes hard to stick with the plan when account balances tank.

Who knew they had high-risk tolerance before? But now they know they can’t sleep at night?

This is where having the third-party matters. Not only does a professional pick investments but can also prevent clients from making rash decisions during quarterly declines because they’re used to seeing multiple markets over time and can lend perspective for everyone’s benefit.

Behavioral finance suggests that investors using advisors regularly prevent their emotional decision-making processes from getting the best of them in ways those doing it themselves can’t control.

The Noise Overwhelmed People’s Decision-Making Capacities

There’s almost too much information available; for every article advocating an investment strategy, ten articles suggest why it’s a dumb idea; social media influencers proffer varying advice; market commentary emphasizes what one should be doing at this very moment versus months from now.

Thus, people are paralyzed. They want to do something with their money but don’t know what, and any noise present prevents them from committing to any strategy.

Thus, working with a professional cuts through the noise, without 19 articles to try and amalgamate everyone’s situation is deduced through direct approaches and personable guidance.

The Pandemic Reminded People How Vulnerable They Are

COVID-19 has forced many people’s hands when it comes to vulnerability; job losses, market downturns, health scares even, people now need emergency funds; insurance coverage was never taken seriously until compared with now.

Thus, getting affairs in order became paramount for those who’ve procrastinated forever; it’s not like some people don’t want nice things; maybe it’s life getting in the way.

Equally as important, pandemics shift remote work, working from home became more acceptable, those who wouldn’t have taken off time to speak to their financial planners now found due dates easier via video chat; thus, increased access resonates with many who wouldn’t have sought out help otherwise.

Younger Generations Don’t Hesitate

Millennials and Generation Z think about money differently than anyone else pre-2000. They’re much more amenable to paying others for expertise via services instead of doing everything themselves. They see value in work-life balance instead of spending their evenings learning complicated investment structures; they’re comfortable with realizing some things are better left to professionals.

At the same time, they’ve had more financial struggles than any early career adult should face, the 2008 recession, rampant student loans decreasing disposable income options altogether, challenging affordable housing markets, and they see how subsequent generations struggled with retirement but don’t want that fate.

People Resorted Back to Thinking About Time

Maybe the biggest shift is this: people learned what time is actually worth. If your income for the year is $75K, that’s about $36 an hour. If you’re spending ten hours debating whether you should Roth convert vs. looking up fund options versus trying to calculate how much you need until retirement, your free time isn’t free. It’s costing you $360 worth of opportunity cost, and you might get it wrong by yourself.

Professional guidance isn’t just there for expertise, professional guidance buys back mental energy cost and time-involved worth by allowing all involved to focus on what they’re good at (or enjoy). For many, this has proven a no-brainer when the trade-off is worth it.

This trend isn’t slowing down. It’s going in the opposite direction, and when it comes down to complicated decisions filled with opportunity costs, and realizing what it’s worth not to go it alone, finding someone who knows all of this better than we do just makes sense! It’s not that we can’t do it ourselves, it’s just that it’s easier and more strategic to use our resources effectively.