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Do I Need a Financial Advisor?

Are you asking yourself, do I need a financial advisor? For many people, the answer is yes, as financial advisors can assist you with your finances in a number of ways. In fact, they often specialize in some combination of investment management, financial planning, retirement planning, estate planning, tax minimization and more. Because there are so many different types of advisors, you’ll have many options to explore. This makes them especially valuable for those with specific financial goals in mind. If you’re thinking about your financial future, use SmartAsset’s free matching tool to get paired with advisors in your area.

Why Financial Advisors Are Important

Financial matters can be quite 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 in a 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 I Need?

Do I Need a Financial Advisor?

There are two basic types of financial advisors: asset managers and wealth managers. If all you want is someone to help you with investments in stocks, bonds and other securities, an asset manager is the choice for you. They will work with you to build a portfolio that aligns with your financial goals, risk tolerance and time horizon.

Wealth managers, on the other hand, are better for those seeking a broader plan for 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 term. They can also 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. This means they combine financial planning and investment management, which should leave you with a complete set of services.

Financial advisors also use different fee structures: fee-only and fee-based. Fee-only is generally seen as the preferable option, as these advisors avoid all outside commissions for things like insurance and securities sales. Conversely, fee-based advisors can accept these commissions, in addition to the fees you pay them. While this could cause a conflict of interest, all SEC- or state-registered advisors act as fiduciaries.

Outside of a traditional financial advisor, you may also want to look into robo-advisors or online advisory services. As you might expect, a robo-advisor manages your money in an automated manner, with algorithms running your portfolio based on your investor profile. An online advisory service is closer to a normal advisor, only your relationship with them is exclusively remote.

How to Find and Hire a Financial Advisor

There are a number of ways to find a financial advisor. One of the easiest options for choosing one is SmartAsset’s free financial advisor matching tool. In a matter of minutes, you’ll match with up to three financial advisors in your area. Then, you’ll have the final choice of who you want to work with.

Another tried-and-true method for finding an advisor is to ask family and friends for recommendations. However, they may have very different needs and goals than you. For instance, let’s say you find a financial advisor through your 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. So if you choose to accept advice from a friend or relative, make sure the advisor can meet your needs.

In today’s day and age, there are a number of online resources that can help you pick an advisor. SmartAsset is a great place to start your search. To find advisors in your area, visit one of our many top financial advisor lists for cities and states across the U.S.

Once you hone in on an advisor you think is a good match, you’ll want to personally speak with them. This is most often done through an in-person meeting, as it lets you get fully acquainted. Feel free to ask the advisor plenty of questions during this meeting. After all, they’re going to be largely responsible for managing your finances.

What to Expect Once You Hire Your Financial Advisor

Do I Need a Financial Advisor?

Once you finally hire a financial advisor, the real work begins. First and foremost, you’ll want to make your advisor aware of any financial matter that relates to what they’ll be doing for you. This could include turning over tax returns, discussing your goals for the future, detailing the size of your various accounts and more.

The above is usually followed by some kind of questionnaire for you. This will help the advisor find out more about you as an investor, which will inform their decisions. For example, your proximity to retirement is extremely important, as is your income needs. In the end, the advisor will try to determine a few key factors: risk tolerance, time horizon, liquidity needs, long-term goals and investment preferences.

After your advisor invests your money and creates your financial plan, it should be mostly smooth sailing. You’ll of course need to check in with them regularly, though, as it wouldn’t be wise to leave things completely alone. You should also alert your advisor whenever your plans for the future change. The sooner you do that, the sooner they can begin adjusting your investments and plans.

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

  • People who have financial advisors report greater financial security. In addition, research suggests that working with an advisor can result in additional annual investment returns. Luckily, SmartAsset’s free tool can match you with up to three financial advisors in your area in just five minutes. Get started now.
  • Before you hire a financial advisor, it’s important to understand how much their services will cost. Most advisors charge a percentage of your assets under management, though you may also incur other fees.

Photo credit: ©iStock.com/Georgijevic, ©iStock.com/AndreyPopov, ©iStock.com/jacoblund

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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