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Suppose you plan to retire with $3 million and want to know: Do I need ongoing wealth management or just a financial plan? The answer often depends less on the size of your portfolio than on the complexity of your financial life.
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I should acknowledge up front my inherent bias toward ongoing advice as a wealth manager, but I genuinely don’t think everyone with $3 million needs ongoing wealth management. For some, a well-designed financial plan and the discipline to follow it may be all they need. For others, though, the value of having someone around to help navigate what happens after the plan is created can be significant. Let’s dive into the cases for both.
Retirement Is Not a Destination
One of the primary reasons I would advocate for ongoing advice is that, in my view, retirement is not a destination. It’s the beginning of a new phase of life, and not just in financial terms. During your working years, your financial picture may have been relatively predictable. You earned a paycheck, contributed to retirement accounts, saved and invested prudently and gradually accumulated wealth.
The questions change once you retire. You will likely ask: How much can I spend? When should I claim Social Security? Does my estate plan accurately reflect my goals in this phase of life? How should my portfolio change? What should I do if the market falls 20% shortly after I retire?
Questions like these don’t get answered once and then disappear. Your circumstances will probably change over the next 20 to 30 years. Maybe you move to another state, buy a second home or incur significant healthcare expenses. Tax laws could change. Your estate plan may need to be updated. Your investment portfolio certainly won’t remain static. A financial plan can give you a roadmap. Ongoing advice can help you navigate the road when it changes.
(Whether you need one-time or ongoing financial advice, consider working with a fiduciary financial advisor.)
Additional Cases for Ongoing Wealth Management
For many retirees, the value of an ongoing relationship goes well beyond managing an investment portfolio. A common misconception about the role of wealth managers is that they only manage investments. Consider all of the financial decisions that can arise during retirement. You might be deciding whether to sell appreciated securities to fund a large purchase or determining how much to withdraw from an IRA to support ongoing lifestyle expenses.
These types of decisions don’t always happen on a predictable schedule. And, often, financial complexity increases with age and growing wealth, making it more burdensome to manage on your own. This is where having someone who understands your entire financial picture can be helpful. Rather than hiring a different person every time something comes up, your advisor can serve as a financial quarterback, coordinating with your CPA, estate attorney, insurance professionals and other specialists when necessary.
I would also argue that behavioral benefits exist. When you’re working, a bad investment decision, a missed tax-planning opportunity or a poorly aligned insurance policy can introduce risk and perhaps lead to some short-term pain. But you generally have a paycheck and time on your side to overcome mistakes.
In retirement, those luxuries might not be there for you. A large and untimely market decline or an unexpectedly high tax bill can have a more pronounced negative impact once you no longer have a paycheck and your time horizon has shortened. Having someone who can help you stick to the plan and advise you when not to react can be valuable.
The drawback of ongoing advice is fairly obvious though: full-service wealth management costs more than a one-time financial plan. In my opinion, that additional cost makes sense if you’re getting something beyond investment management: think ongoing and high-touch planning advice, coordination and administrative support.
(And if you need help finding a wealth manager, this free tool can connect you with advisors who serve your area.)
Curious whether a financial advisor is worth the cost? SmartAsset’s Financial Advisor Value tool can help you estimate the potential impact of working with a fiduciary advisor.
When a One-Time Plan May Be Enough
Not everyone needs an advisor in their corner indefinitely, however. For some people, a one-time financial plan may be a better fit, and not just from a cost perspective. Imagine you’re retired, have relatively simple finances and work with a trusted CPA. You don’t have significant estate planning needs or family complexities, and you enjoy managing your investments. You’re also disciplined enough to follow a plan even when turbulent times arise.
In that situation, paying for a comprehensive plan could provide considerable value. You receive an objective assessment of your retirement income and withdrawal needs, investment strategy, tax situation, estate and insurance gaps and other financial considerations. Then you can take the plan and implement it yourself. There’s no question this approach is likely to be more cost-efficient.
The Drawback of One-Time Plans: Changes Will Happen
The glaring potential drawback is that a financial plan is based on many assumptions. What happens if those assumptions change? Maybe you decide to move to a different state, want to buy a vacation home or a family member has a financial setback and you want to help.
You can always go back and have another financial plan created. But at that point, you could find yourself paying for multiple plans over time, diminishing the cost savings. While it would likely still be less expensive than ongoing wealth management, it’s worth recognizing that you’re effectively paying for advice on a project-by-project basis and still bearing the responsibility of coordinating and implementing everything yourself.
(And if you’re unsure what makes the most sense for you, speak with multiple financial advisors and see how they may help.)
Putting It All Together
Regardless of whether you’re retiring with $1 million, $3 million or $10 million, I wouldn’t make the decision based on the amount of your savings alone.
How complex is your financial life? Multiple accounts, tax or estate planning needs, charitable goals and other moving pieces can make ongoing advice more valuable than a one-time financial plan.
How much do you enjoy managing your finances, and how would you honestly assess your ability to execute? Some people genuinely like doing this themselves. Others would rather spend their retirement on their hobbies, traveling or spending time with family. Neither approach is wrong; it’s deeply personal and just requires an objective self-assessment.
Tips for Finding a Financial Advisor
- Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As you look for a financial advisor, look for credentials and services. Consider an advisor’s qualifications, areas of expertise and whether they offer the type of planning or investment management you need.
Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Jeremy is a financial advisor and head of business development at DBR & Co. He has been compensated for this article. Additional resources from the author can be found at dbroot.com. Please note that Jeremy is not a participant in SmartAsset AMP and is not an employee of SmartAsset.
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