Are you asking yourself, do I need a financial advisor? The short answer is yes, you probably do. A financial advisor is a professional who can assist you with your finances in a number of ways. This expert can help with investing, financial planning, retirement planning and more.
Obviously not every single person needs a financial advisor. However, if you have a certain level of investable assets and are thinking about your financial future, working with a financial advisor is key. This guide below walks you through what financial advisors do and why they’re important. Plus, it examines exactly who will be well-served by working with a financial advisor.
Why Financial Advisors Are Important
Financial matters can be complicated. Tasks like buying and selling stocks, preparing for retirement and protecting your estate so you can pass it on to your children are all complex and often involved. Handling all of them on your own is enough to make your head spin.
A financial advisor can help you make sense of all of these tasks. Financial advisors can holistically examine your financial situation and help you craft a financial plan to ensure you make decisions that are in line with your larger financial goals.
Furthermore, financial advisors have the investment expertise to make shrewd decisions in order to grow your money. A financial advisor can help you to create an asset allocation that fits with your goals and adjust it as you get older or your goals change. At the same time, financial advisors can help you to protect your assets, which becomes especially important as you near retirement. With the help of a financial advisor, you can ensure you’re ready to retire when you want.
Who Should Have a Financial Advisor?
There is no specific age, career point or salary level when it becomes apparent that you need a financial advisor. Generally speaking, when your financial life is more complicated than simply depositing your paycheck and taking out money, it is time to find a financial advisor. Many financial advisors have a minimum initial investment requirement, though, so you’ll have to make sure that the financial advisor you find is one who fits your financial situation at the time.
Another sign that it’s time for you to get a financial advisor is if you’re going through any major life transition. This could be anything from starting a family, receiving a sizable inheritance or going through a divorce. If you have kids, for instance, you’ll want to start thinking about saving up for their college education and possibly passing on an inheritance. The right financial advisor can help you do these things.
What Type of Financial Advisor Do You Need?
There are two basic types of financial advisors you’ll need to choose from: asset managers and wealth managers.
If all you want is someone to help you with investments in stocks, bonds and other financial products, an asset manager is the choice for you. An asset manager will work with you to build a portfolio that tracks with your financial goals, risk tolerance and time horizon.
Wealth managers, on the other hand, are better for those seeking a broader view of their finances. In addition to helping you build your portfolio, a wealth manager will consider your overall financial health and take steps to protect your assets over the long run. A wealth manager can help with things like tax planning, estate planning, education savings and charitable giving.
Many financial advisors serve as both an asset manager and a wealth manager. Before you hire a financial advisor, just make sure that you’re hiring one who will be able to provide the services you need.
Where Can You Find a Financial Advisor?
There are a number of ways to find a financial advisor. One of the tried-and-true methods is to ask family members or friends for recommendations. This is an understandable instinct. After all, why wouldn’t you take the advice of someone you trust? There are potential downsides to this method, though.
Your family and friends may have very different needs and goals from you. Many people, for instance, find a financial advisor through their parents. The problem with this is that the needs of a 30-year-old are likely to be much different from those of a couple in their 50s or 60s. If you choose to accept advice from a friend or family member, just make sure the financial advisor can provide the services you want. Ideally, you’ll ask for recommendations from a friend or family member in a similar financial situation.
Another way to find a financial advisor is by using SmartAsset’s financial advisor matching service. Our service matches you with up to three advisors in your area based on your answers to questions about your financial situation and goals.
The Bottom Line
There is no hard-and-fast rule for when it is time to get a financial advisor. There are few things to consider, though, if you’re trying to decide if you need a financial advisor. If you have enough money in your bank account to start investing, you might want to find an advisor. Another sign you need an advisor is if you’re navigating a significant life change. For instance, if you’ve recently become a parent, finding a financial advisor can help you plan for your child’s future.
Tips for Finding a Financial Advisor
- Finding the right financial advisor is key. To make it easier to find an advisor who meets your needs, SmartAsset developed a free financial advisor matching service. Here’s how it works: You answer a short series of questions about your financial situation and life. Then, we match you with up to three financial advisors in your area. SmartAsset fully vets all of of the advisors on our platform and makes sure they are free of disclosures. Your advisor matches will then reach out to answer any questions you may have.
- Before you hire a financial advisor, it’s important to understand how much their services will cost. Most advisors charge based on a percentage of assets under management. However, there may be other fees involved. A key distinction to note is whether an advisor is fee-only or fee-based.
Photo credit: ©iStock.com/Georgijevic, ©iStock.com/AndreyPopov, ©iStock.com/jacoblund