In recent times, DIY money management has become a thing. Making a budget is not a difficult thing as many people are used to it; they budget for different reasons whether savings or investment. Still, there are times where you need to ditch your DIY ways and hire a professional financial advisor.
Who is a financial advisor? They are professionals who can provide you sound advice in areas like taxes, retirement, and investing. While anyone can be a financial advisor, the professionals stand out of the crowd as a chartered financial consultant and certified financial planner, indicating an advisor has high level of competency in the field.
Why you need a professional financial advisor? A competent advisor will listen to your aims, examine your current income, and recommend your strategies to reduce taxes, maximize the savings, and reduce debts. Several planners don’t charge for the first consultation. However, some do charge hourly rate starting from $150 to $300 to create a financial plan or counsel about a specific financial topic.
While you don’t need a professional financial advisor continuously, there are certain points in life when you should stop and get some sound financial advice.
When to Pursue Financial Advice?
Many people out there who are bad at money management seek financial advice to deal with specific changes in their lives; these phases vary from investor to investor; however, can consist of:
- I received some money from a parent, and I want to get proper advice on how to invest that money.
- I’m close to my retirement, and I want to ensure that if I’m on the right track.
- We recently got married and need help in managing our finances as a couple
- I was recently widowed or divorced and need assistance in moving forward financially as a single person.
- My parents are getting older, and they need help managing their overall funds.
- I like to plan and invest financially, but want a second opinion to see if I can do better at it.
What Assistances Can You Assume From Appointing A Personal Financial Advisor?
In my opinion, there are some reasons you should look into when hiring a personal financial advisor:
- You are lost in planning your financial future, and you need a plan for it.
- You don’t want to manage your money anymore. When it comes to money management, you are certainly not the DIY type, and you want someone to take care of it.
- You like to manage your money, but you realize your financial plan is not helping and you need an un-emotional third-party opinion.
Personally speaking, every one of us falls into these categories. But let’s look at some other situations and consider when its time to hire a professional financial advisor.
You Need Assistance With Planning Your Financial Future
This can be correct for many of us when we are starting. There are several goals
This may be true for most of us when we’re starting out. There are so many goals competing for our limited financial resources: Paying off student loans, funding a retirement account, saving an emergency fund, buying a house, taking a vacation, getting married, having fun NOW. It’s no wonder we find money so overwhelming as 20- and 30-somethings!
But it comes back to the cost of a financial plan. Another thousand dollars or two is a lot of money and yet another goal to throw in the pot with all the others.
Related: Are Certified Financial Planners Worth the Money?
Here’s my take: If you have a comfortable emergency fund and can afford a financial advisor’s fee without going into debt, a financial planner might be a good investment. In fact, the planner’s fee may pay for itself in a few years if he or she helps you make better financial decisions in the meantime.
2. You just don’t want to deal with money
Some people hate managing their money. And that’s cool; what’s important is that you recognize it and get someone to do it for you. In this case, hiring a financial advisor is a no-brainer.
What you’ll need, however, is enough investable assets for an advisor to take you on.
When it comes to investment advisors, most can’t afford to work with you as a client until you have $100,000 or so of investments. Some drop that to $50,000 while others won’t take clients until they have $500,000 or even a $1 million to invest. So you’ll have to shop around.
I think the $100,000 level makes sense. If you have less than that invested, you’re better off sticking your money in low-cost index funds and leaving it be.
3. You want an impartial third-party opinion on your money
There are a lot of do-it-yourself investors who never hire a financial advisor. Their thinking is—I like doing this myself and I’m fairly savvy, why would I pay someone one percent of my money every year and reduce my returns?
But here’s the thing: No matter how much you learn about investing, you’ll never be on an even playing field with Wall Street. And no matter how much you learn about investing, you’ll always be human and, therefore, susceptible to making irrational decisions.
If paying a financial advisor saves you from one bad decision a year—or spots an opportunity that you overlooked—he or she may very well increase your investment returns, despite the
Is a Financial Planner Right for You?
The real value of a good financial planner is in helping you live a better life. They can help you make better financial decisions and take full advantage of the opportunities available to you. And on top of that, there’s the peace of mind that comes from knowing that your finances are on the right track.