Do you really need a financial advisor, or are you capable of handling all your financial issues?
While making all the financial decisions regarding your personal finances looks like a walk in the park, you should get a personal advisor. In fact, it is recommended that you get one right from the minute you start earning! And why not? You hire a lawyer for all your legal issues or a mechanic to fix your car. So why not get a professional to help you with your finances?
And let’s be honest, most of us lack the time or the necessary financial knowledge that financial experts have. It’s their job to follow up with the happenings in the industry, from the tax to other regulatory changes and new investment opportunities.
Who Is a Financial Advisor?
Think of them as your financial planners, counsel, and manager on all personal finance issues. They help in planning and managing your finances. That means a financial advisor can:
- Help assess your present and future financial goals and objectives.
- Develop a financial plan that touches on all your areas of concern, from retirement planning to estate planning, insurance, investment, and tax management
- Help you set up investment accounts as well as the management of these accounts.
- Advise you on the best investment vehicles and strategies that will help you meet your objectives
- Offer you advice on any upcoming issues that touch on money.
We all have some finance and investment knowledge to offer. However, I recommend working with a professional and certified advisor. Keep in mind that financial advisors will have different qualifications, with some having more than one of the necessary qualifications. These include financial planners (CFP), financial analysts (CFA/FA), accountants (CPA), investment advisors (RIA), or personal finance specialists (PFS).
Top 3 Reasons To Get a Financial Advisor
1. To Save Time
Between your daily work and other routine stuff, do you have the time to mull over the state of the market, industry, tax changes, and financial statements of companies you want to invest in? Probably not.
So, why not let an advisor do that for you, and you can free that time for other important stuff, like making more money? That’s why even the wealthy have advisors. It saves them the time and stress of having to do all this groundwork.
Financial advisors live for this and will probably get all the necessary information in half the time you would spend bent over your desk reading reports.
2. For More Than Just Investment
Yes, a financial advisor will invest for you and offer the necessary information and help regarding investments, from the best investment vehicles to asset allocation. But there is more to having an advisor.
Your advisor can also help you with;
- Tax planning: tax applications vary between investment situations, and it is challenging for one to keep track of this and any changes. Your advisor can fill in all the blanks about taxes and help you understand the tax implication that every investment move brings. They will also let you know what is due and when to pay.
- Rebalancing your portfolio: for diversity, your portfolio should have different asset allocations. For instance, you could have 40% stocks, 40% bonds, and 20% in real estate. If your asset allocation deviates from the initial target or changes in your life, like getting closer to retirement, you will need to rebalance the portfolio.
Learn more about Portfolio Diversification And How to Achieve It
This is where an advisor comes in handy. They will always keep an eye on your portfolio to ensure the allocation meets your objectives at any time. And, when it is time to rebalance, they provide you with insights on the best way to go about it. For example, what asset should you sell or buy, and what percentage?
- Retirement planning: we rarely think about retirement, even as we save for it. How will life be like? Should you continue working? Will your retirement income be enough? How much should you save now to ensure you have enough cash flow? If you have multiple savings options for retirement, like a state pension scheme and a private scheme, which of these streams should you ap to first? And when is the right time to withdraw your pension? All these are questions a financial advisor can help you with to ensure every retirement move is well thought.
Related post: 5 Key Steps to Safe Retirement Planning
- Estate planning: do not forget that part of building wealth is ensuring your beneficiaries are well cared for if anything happens to you. Estate planning involves more than just leaving a will. With estate planning, you can leave directives on what happens if you become incapacitated. It also includes a living will, which gives directions of your healthcare when you are not in a position to do so.
3. To Manage Your Emotions
One of the keys to financial success is keeping your emotions in check. There is a reason why you are advised never to make a financial decision when you are emotional, whether you are happy, sad, fearful, depressed, or frustrated.
“Personal Finance is 80% behavior and only 20% head knowledge.”
Get a financial advisor to help you keep your emotions in check. If the market dropped now like it did when the pandemic first hit, your first instinct will probably involve selling your stocks, so they don’t sink deeper.
But markets always recover, and those who hold their investments for the long-term always benefit when the market recovers. But it’s hard to think like this when you involve your emotions. So instead of selling, your advisor will even encourage you to invest more when the stocks are cheaper.
Learn more in a related post What’s Your Money Script and How Does It Affect Your Finances?
Watch Out For The Red Flags
However, not every financial advisor will have your best interest at heart. Á dishonest and incompetent advisor can cost you more than you would lose if you handled your won finances. To ensure you settle for the best financial advisor, watch out for these red flags;
- They do not have the proper certifications or are registered with a professional body. Such financial advisors have a fiduciary duty to put your interests first.
- They always offer you investment options with high expense ratios, like high-cost mutual funds instead of ETFs and index funds.
- They are always prompting you to buy or sell unnecessarily, which increases their earnings through commissions.
- They are not available when you need them, like dodging your calls and not returning your emails or messages.
While financial advisors are not free, they can be the lifeline between your investment and personal finance decisions. Ensure that you get a trusted advisor, one with the proper qualification, and let them save you the stress and time of dealing with all the finance jargon. Most importantly, they will do more than investing your money.