The coaching manual will generally tell you that the hands should be about 2 fist widths from the waist. The key it to adopt a posture that provides this distance without you reaching for the ball (there's an excellent posture drill posted on this site).

If the hands are too close then there's potentially two problems:

1) The swing will get very wristy to clear the clubhead through the striking zone giving erratic results

2) The swing plane will vary (in to out) or (out to in) resulting in inconsistent ball flight.

I've increased the distance from my hands to my waist and in conjunction with improving my posture and my consistency has increased immensely.

Hope this helps.

Paul