When do you need a financial advisor? Experts explain


One of the best investments you can make to achieve your financial goals is to work with a financial advisor. While financial planners can help you achieve your short-term and long-term financial goals, such as budgeting, investing, and planning for retirement, a financial advisor will focus on your investment game. They can recommend, or even buy and sell, stocks, bonds, and mutual funds for you so you don’t have to spend your days glued to Bloomberg or CNBC tracking every market move.

“Whether you’re buying a house on your own, getting married, starting to think about your kids, planning for retirement, or just want to build a solid financial roadmap, a financial advisor can help you invest strategically and plan carefully for the future you really want,” says Emily Green (opens in a new tab)the Director of Private Wealth Management at the Women Focused Investment Platform Ellevest.

But Green and other experts agree that you don’t have to take a personal step to bring a financial advisor into your life. Here’s a four-step action plan to help you decide if you need a financial advisor and how to find someone you trust.

Step 1: Determine if you need a financial advisor

Catherine CurtisCertified Financial Planner (CFP) and Founder and CEO of Cathy Curtis Financial Planning, which is aimed at self-made women and female-headed households, says that while working with a financial advisor is beneficial at all times, you may want to wait until you have enough money to comfortably cover the associated costs. . A trigger can be getting into a high-paying job, receiving a raise, bonus, or equity, or receiving an unexpected windfall like an inheritance. If you’re not ready to pay for a financial advisor, you can start with a robo-advisor, which is usually more affordable. Some investment companies and apps (such as Betterment, Ellevest, Sofi, and Vanguard) offer ongoing access to a financial advisor so you can get personalized advice for less.

Step 2: Determine your needs and budget

Once you’ve decided to hire a financial advisor, determine what services you need, your investing style, and what you’re willing to pay for their services. Financial advisors can help you with a variety of portfolio management tasks such as impact investing, environmental, social and corporate governance (ESG) investing, and tax, estate, retirement and life planning. ‘education.

When it comes to investment styles, there are several, including growth, value, buy and hold, index, dividend growth, and impact investing; and active or passive management. The world of personal finance is riddled with jargon, but it’s easily manageable.

But for now, let’s dig into the fees. Anna N’Jie-KonteCFP and founder of Dare to dream in financial planning, who specializes in serving high-income women of color, explains that there are three main compensation structures for financial advisors. Some financial advisors earn a commission on the insurance or annuity plans they sell, others receive a fixed percentage of your assets under management (AUM), and paid financial advisors charge an hourly rate or project fee. (You may also find an advisor who prefers a commission made up of a combination of two or all of these.)

Step 3: Research potential financial advisors

If you have friends or relatives who use a financial advisor, it helps to get a recommendation. But don’t accept referrals blindly. Be sure to review them based on your own needs and keep shopping around to find the best fit.

Curtis points out the National Association of Personal Financial Advisors (NAPFA) or XY planning network (XYPN) to find an advisor by specialty or location. She explains that the counselors are all CFPs, which means they have gone through an extensive certification process. “These organizations support independent advisers who are fiduciaries, which means they are sworn to give advice that is in the best interest of their clients at all times,” she says.

N’Jie-Konte recommends getting financial advisors and businesses through BrokerCheck to learn about their credentials, employment history, services they provide, and certain criminal, regulatory, civil, or customer complaints that have been filed against them or their business. You may also want to double down on your due diligence by checking your securities regulator and performing a background check.

Step 4: Assess if this is the right solution

Your next step is to interview financial advisors. Curtis recommends speaking with at least three financial advisors before making a decision and asking:

  • What is your process for working with a client like me?
  • What is your experience working with clients like me?
  • How are you paid for the services you provide? Besides what I pay you directly as an advisor, are there any other fees I should be aware of?

Green also suggests considering the extended team, if there are employees who match your demographics and understand your needs, and if you feel comfortable with the advisor and the company. Instead of just focusing on retirement planning and portfolio management, N’Jie-Konte advises women in their 20s and 30s to make sure the financial advisor will help them with short-term goals, such as as student loan repayment and cash flow management. Once you’ve done your due diligence, found someone who fits the bill, and shows alignment with your financial goals, don’t be afraid to DTR. Make it official by signing a financial adviser contract and make sure to meet with your adviser at least once a year, every year.

Key points to remember

  • Working with a financial adviser is beneficial at all times, but you may want to wait until you have enough money to comfortably cover the associated costs.
  • Once you’ve decided to hire a financial advisor, determine what services you need, your investing style, and what you’re willing to pay for their services.
  • Be sure to check financial advisers; interview them by asking the three key questions above.

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