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When Should I Talk to a Financial Advisor

April 6, 2021

Financial planners are professionals who are trained in providing relevant, specific, and beneficial financial advice for a fee. A good financial planner would have a statutory duty towards their clients (meaning that they are required by law to protect the interests of their client), be accessible when needed, and charge competitive fees. Financial advisors are not supposed to tell you which stocks to pick, or sell you investments or insurance products on a commission. The right financial planner can be a huge asset to your financial goals. Let’s talk about when you can benefit from going to a professional for financial advice:

  1. You’re serious about creating an investment strategy

A few weeks ago, we wrote about why it’s so important to have an investment strategy for your money. However, we don’t know what we don’t know. Complete beginners to the world of investing might not even know what to Google, or feel so confused about the information that they find online that they keep their money in a savings account and hope for the best. In these cases, it might be better to work with a financial advisor who has expertise in setting new investors up for success. Most consumer banks have investment professionals who are available to answer a few questions (although they will probably present their own products as the ‘right’ solutions) but an initial consultation might be all that’s required. Other investment platforms may also offer a consultation with a financial advisor as part of the benefits of investing on their platform.

If you are just starting out, the amount of money you have available to invest may not get you personalized financial advice from a bank or investment firm. Don’t worry – there are options for that. Robo-advisors have disrupted the investment world with their automated investments and low-cost fee structures. These services (offered by companies such as Wealthfront and Betterment) set up and automatically rebalance an investment portfolio for you based on your goals and risk tolerance. They are a great tool for people who want to invest their money quickly and easily, but don’t have any ‘special circumstances’ that warrant paying for personalized advice.

  1. You’ve just gone through (or are planning) a major life event

A major life event like a career-switch, wedding, divorce, a baby, or an inheritance might require the help of a financial advisor. Deciding to retire, take an early retirement buyout package, sell a business, take a lump sum over a pension, start Social Security, or buy a home with cash are some more examples of major financial decisions. A financial advisor (or a financial planner – you’ll often see these terms used interchangeably) can walk you through all of your options and help you to make the most well-informed decision.

The life event may be unplanned or unanticipated, which is definitely a cause for involving a financial expert who can help you navigate the waters. You’ll need the tools, experience, and objectivity a financial advisor brings to help you make the best decision at this time.

  1. You want to avoid emotional decision making

The pandemic introduced a lot of uncertainty into our lives. On a global level, stock markets and financial institutions quickly became volatile and were forced to quickly make decisions on interest rates, currency valuations, inflation levels, taxes, etc. While the pandemic is (hopefully) a once in a lifetime event, many geopolitical events, changes in technology, and trends impact our financial situations.

When there is mass panic, relying instead on logic and data can be challenging. Financial advisors are (usually) bound by rules and regulations and policies set by their firms, which helps them make less emotional decisions. Most retail investors get caught in the fear of missing out and they sell when they shouldn’t sell and buy when they shouldn’t buy.

  1. You’ve significantly upped your savings and net worth

A good rule of thumb is to hire an advisor when you can save 20% of your annual income. Additionally, if you receive a sum of money that is a significant chunk of your finances (think 3 months of salary or expenses or more), it might be a good idea to reach out to a finance professional. They can help you put together a long term plan for your money. Financial planners can help you decide where to invest, what options you have and what might be the best way to increase your overall wealth. If they have expertise in taxes, they may even be able to help you navigate tax-advantaged solutions.

It’s also a good idea to involve a financial advisor when you’ve built up some assets for your retirement. Since the time horizon for retirement is often a decade or more, you may be able to take on more risk. Financial advisors can help you invest your money in a way that will be of most help to you when you’re ready to retire.

  1. You need help diversifying your portfolio

If you’ve gotten to a point where most investment advice available online doesn’t apply to you anymore, it might be time to reach out to a financial advisor. Most people start their financial journey by following these steps:

There are many more things investors can do to maximize their savings and lower their taxes. There are also many asset types available to retail investors now, from real estate to cryptocurrency. Other investors might receive company stock as part of their compensation agreement or bonuses, and need to diversify into other assets to have a well-rounded portfolio.

The takeaway

Choosing whether or not to use a financial advisor is a personal decision that depends on your goals, your experience with investing, and how much time you have to devote to financial planning. If you feel confused or can’t find good, relevant financial advice online anymore, it’s probably worthwhile bringing on an expert to handle the complicated financial side of things.

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