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Do I Need a Financial Advisor?

Managing your finances can be an overwhelming task, and we’ve all asked ourselves at one time or another if it’s time to hire someone to do the job for us. You may be wondering if a financial advisor is really necessary, how to decide when to hire one, and how much you can expect to pay. We’ll be covering all of that in this article.

Read More: How to Get Personalized Advice From Someone Who Listens

Reasons to Seek Professional Financial Advice

Most often, people hire financial advisors to help them oversee their investments and make investment decisions. But financial advisors do far more than that. They can help you set financial goals and then craft strategic plans to help you achieve them.

Financial advisors help people with a variety of tasks relating to their investment portfolios. They can help you identify the right asset allocation, ensuring that your portfolio is properly diversified. They can also help you optimize your tax situation and rebalance your portfolio as necessary.

Financial advisors can also offer advice on topics separate from your investment portfolio, including creating a budget or debt payoff plan.

Read More: How This Couple Paid Off 6 Figures of Student Debt While Saving for Retirement

Pros and Cons of Hiring a Financial Advisor

Before hiring a financial advisor, it’s important to consider the advantages and disadvantages.

Pros

  • Expert advice: When you hire a financial advisor, you get the benefit of years of expertise. Advisors spend far more time researching the market and individual investments, so they bring something to the table that most individual investments can’t do themselves. Your advisor can also provide you with insights on tax optimization. You can learn more from Personal Capital’s advisors in your free, downloadable guide 5 Tax Hacks Every Investor Should Know.
  • Peace of mind: When you hire a financial advisor, you have the peace of mind knowing that someone is keeping you on the right track, ensuring you meet your financial goals on time.
  • Saves you time: Researching and purchasing your own investments can be a time-intensive process. Hiring a financial advisor saves you that time, which can be worth far more than the cost you pay for their services.

Cons

  • Cost: Depending on the type of financial advisor you hire, you can expect to pay an annual fee for them to manage your investments. A typical fee is about 1-2% of assets under management. So if they managed $100,000 for you, your fee would be $1,000 to $2,000 per year.
  • Loss of control: It can be stressful to hand control of your investments over to someone else. It requires an incredible amount of trust, and it can be challenging to find the right advisor for you.
  • Potentially biased advice: All financial advisors should have their clients’ best interests in mind, but that’s unfortunately not always the case. For advisors who are paid strictly through commission, they may be more interested in recommending products than making the best decisions for your goals.

Read More: What is a Fiduciary? Here’s Why It Matters in Money Management

When is it Time to Hire a Financial Advisor?

It can be difficult to know when it’s time to hire a financial professional to manage your money. Here are a few questions to ask yourself to help you know if the time is right.

Are you going through any major life changes?

Major life changes are often the perfect time to seek the help of a financial advisor. Whether it’s getting married, starting a family, or making a big career move, a financial advisor can help you set and reach your financial goals and make strategic money moves.

Are you struggling to organize your finances?

A financial advisor might be a good idea if you find that you can’t keep your finances organized on your own. Rather than letting things fall through the cracks, consider hiring a professional to keep you on track.

Are you unsure if you’re on track for retirement?

One of the greatest fears many Americans have is not being able to retire comfortably. Many people worry whether Social Security benefits will be available by the time they retire, and data consistently shows that most people simply aren’t saving enough.

A financial advisor can take a look at your financial situation and tell you whether you’re on track for retirement. If you aren’t, they can advise you on what you can do to get there.

Do you want someone else to make your investment decisions?

Investing can be quite time consuming, with everything from researching investments and funds to the actual buying and selling. Many people would rather hand those tasks off to a professional.

If you simply want someone else to advise you on your investing moves, a financial advisor might be right for you.

What to Expect When You Meet With a Financial Advisor

When you meet with your financial advisor for the first time, they’ll want to gain a full understanding of your financial goals and current financial picture.

First, your advisor will ask you a variety of questions about your finances, including your income, monthly expenses, current investments, and more. Next, they’ll try to get a picture of where you want to go. For many people, retirement is the primary financial goal they need help with. But you may have other savings and investment goals they can advise you on.

From there, your advisor will put together a financial plan where they’ll recommend next steps. The plan will include details such as investments they recommend and how much to invest each month to meet your financial goals.

How to Find a Financial Advisor

Finding the right professional to manage your money can be challenging. You want to work with someone who’s qualified and that you trust while still being conscious of the cost. Here are a few steps to follow to find the right financial advisor for you:

1. Understand the different types of professionals.

Financial professionals go by many different titles, including financial advisor, financial planner, or wealth advisor. Some may help create a holistic financial plan, while others focus solely on managing your investments. It’s important to understand what you want out of a financial advisor.

2. Look for the right credentials.

There isn’t necessarily a specific set of credentials required to be a financial advisor. Certified financial planners (CFPs) are held to a fiduciary standard, meaning they have a legal and ethical responsibility to act in your best interests. All of the financial advisors on Personal Capital’s wealth management team are fiduciaries, so they are held to the highest standard.

3. Ask how they’re paid.

Financial advisors are typically paid by either fees or commissions. While it might be tempting to hire a financial advisor who is being paid by someone other than you, remember that being commission-based could also mean your best interests aren’t their top priority.

4. Ask questions.

Just because someone is a good financial advisor doesn’t necessarily mean they’re the right one for you. It’s important to find someone who feels right to you and who has a similar financial philosophy so you know they’ll manage your money in a way you’d want.

Our Take

Hiring someone to manage your finances feels like a big step. Not only is there an added cost to have someone manage your investments, but there’s also the anxiety that can come with handing over control.

There’s no one right time when people should seek professional help. But an advisor can bring a level of expertise and attention to detail to your investment portfolio that you may not be able to. Additionally, you’ll have the peace of mind of knowing that someone else is keeping you on track to meet your financial goals.

Let’s Get Started

Personal Capital compensates Erin Gobler for providing the content contained in this blog post. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Erin Gobler is a money coach who helps people pay off debt and reach their big financial goals without giving up spending on the things they love.
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