When Is It Time To Hire A Financial Advisor?
Unless you are a financial expert, you may ask?When To Hire Financial Advisor? Many companies hire accountants or Tax experts to help them in dealing with the complex issues when it comes to money management.?
What Are Financial Advisors?
Let’s be honest: Not everyone has the time or desire to become a financial expert. Still, these days, it is increasingly important to be able to manage one’s personal and household finances.
Don’t fret, though.
If you would rather have an easy plan that you can execute without having to constantly worry about changes in legislation or the economy or financial products, then you might consider hiring a?financial advisor .
While nearly everyone could benefit from working with a professional financial planner, the cost is often prohibitive.
There comes a time, however, when paying for financial advice becomes a solid investment in your future. How do you know when it’s time to hire a financial advisor?
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From time to time I get emails from readers who have realized that they need financial help that goes beyond reading blogs and books.
Some readers’ finances have suddenly grown more complicated, either as the result of a new job or an inheritance, while others simply want personalized advice that helps them increase their?savings or pay down debt.
When is it time to hire a financial advisor
After over 15 years of writing on the subject, I consider myself well versed in personal finance, but I don’t have experience with individual counseling.
That’s something to consider if you seek a financial advisor; it’s no different than seeing a doctor who may have 10 years of research and publishing experience but has never performed clinical exams.
What I do in these situations is recommend to our readers that they?begin to search?for a fee-only financial planner in their area ?(assuming the reader really does need a?personal financial advisor and can afford one).
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I recommend two websites that make finding a financial advisor easier:?Paladin Registry?Registry ?and?SmartAsset.
Paladin Registry ?offers two free ways to track down a financial professional in your area. You can use the match service, which gathers information about you and your needs, then suggests the right advisors.
You can instead use the directory and go through the list of certified professionals on your own. Once you find an advisor you’re interested in, you simply schedule an interview.
Another useful tool for your financial planner search is?Smart Asset .
After answering a few questions about your current situation and future financial goals, the built-in tool matches you with up to three prescreened advisors.
You can then easily set up an interview with each planner and choose the one that best fits your needs and preferences.
But before you start looking for a financial advisor, it’s important to understand how it can benefit you, and what you can expect from the experience.
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Understanding Financial Advisors
Financial advisors, sometimes known as?financial planners , are professionals who advise their clients on decisions related to wealth management and personal finance. But?When To Hire Financial Advisor.
Depending on their area of expertise, financial advisors can help you with everything from putting together an entire retirement savings plan with a timeline attached to it or simply answering a question about whole life insurance.
Here’s a small snapshot of some of the things that a financial advisor can do:
Personal finance isn’t interesting to everyone! And it doesn’t have to be. But if you’re neglecting your finances, it’s likely worth it to hire a financial planner
When Is It Time To Hire A Financial Advisor?
In a perfect world, everyone would have financial advisors with whom we could check in once a month or call before making a big purchase or investment decision.
Realistically, however, financial advisors are expensive . And that’s not necessarily because they don’t want to work with people who can’t afford them, but because advisors have to charge a certain amount to make a living doing what they do.
As a result, the decision to hire a financial advisor requires a careful cost/benefit analysis, which I’ll cover next.
So, How Much Do Financial Advisors Cost?
It varies, is the answer in short.
But I’m going to try to break it down somewhat here:
So let’s look at some real numbers so you’ll get a sense of how much you may be paying.
If you have $200,000 to invest, you would pay $2,000 a year. If you have $1 million, the fee would jump to $10,000 a year, although some advisors have a fee structure in which the percentage slides down as your assets grow.
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Rule of Thumb: Always Ask How Your Advisor Is Compensated
Whenever you meet with financial advisors, ask how they are compensated.?Some financial advisors earn their fees from banks and investment companies.
So although they offer “free” advice – which may very well be tempting – these advisors usually earn commissions from the investments they sell you.
Over time, being in the wrong investments may actually cost you more than paying a fee-only advisor.
I’m not saying all advisors who work on commission are going to give bad advice, but a good advisor should be transparent.
Life Events That Can Prompt Financial Advice
Oftentimes, particular events prompt a person to seek out financial advice.
These events usually involve windfalls or major losses—or a major life event. You may be more likely to seek financial advice if you find yourself in one of these scenarios:
At some point, everyone needs to develop a long-term financial plan that includes considerations for retirement, paying off your house, funding college education for your children (if you have them), estate planning, and a timeline for when you can actually retire.
These are also good reasons to seek out a financial advisor.
How to Choose a Financial Advisor
What Benefits Can You Expect From Hiring a Personal Financial Advisor?
In my opinion, there are three reasons to hire a personal financial advisor:
I think all of us will fall into one of these three categories…at least eventually. But let’s look at each situation and?consider when it’s time to hire a financial advisor .
What Is The Right Time to Hire A Financial Advisor?
1. You’re Simply Looking To Get Your Financial House In Order
No rule says you have to experience a major life event to move forward with a financial advisor.
Sometimes, you might just be unhappy with your financial situation. Rather than let it get out of control, you may want to take action to get things back on track as fast as you can. Partnering with a financial advisor can help.
Even if you don’t have a ton of disposable income, you can still get started on the right path by leveraging digital advisor tools like?Wealthspire? Pathways , which can automatically rebalance your portfolio to help you meet your financial goals.
Now that you’re ready to hire a financial advisor, it’s time to figure out what that advisor should look like.?
Read this blog ?for more information about the key attributes to look for when choosing a financial advisor.
One-time financial advisor
2. You Need Help With Planning Your Financial Future
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.
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.
3. You’ve Landed a New Job or Come Into Some Money
If you started a new job that came with a hefty raise, recently got married, or came into money due to a death in the family, you are more or less in the same situation as the previous example.
Rather than waste your money on frivolous items, you should strongly consider working with a financial advisor who can help you invest those funds in a way that will enable you to meet your long-term goals.
4. 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.