When do You Need a Financial Advisor?

Cole Mayer  | 

Whether you have just won the lottery or are simply trying to plan for retirement, there are quite a few reasons why you would want to hire a financial advisor to help you with your money. Let’s look at what a financial advisor actually does, and a few scenarios where you might consider employing one.

Should I get a Financial Advisor?

To answer this question you first need answers to a separate question: What do financial advisors do? Also known as financial planners, they can help you manage your money by operating your bank accounts, helping you set a budget, managing your investments in the stock market or your retirement fund, offer tax advice, sell insurance, and more. However, depending on the official title, they may only do some of the listed options. A private banker, for instance, has more power over your investments than just a plain advisor, who might simply research and advise, rather than directly investing on your behalf.

It’s also important to know that, titles and duties aside, not all advisors are created equal. Some are merely salesmen, trying to sell you on their firm’s products, rather than having your best interests at heart. While it isn’t quite as bad as credit repair scams, it’s still something to be wary of when interviewing financial planners before deciding on one.

Something to note is cost. Helping you with a budget or financial plan could cost between $1,000 and $2,000. A monthly retainer for an ongoing relationship could be a couple hundred dollars. Others might be fee-only advisors, charging a percentage of your investments.

To answer the question whether you need a financial advisor, let’s look at a few scenarios where the answer is a solid “yes.”

Starting a Family

Starting a family can result in a dramatic shift in finances. With diapers, formula, toys, college funds, and many, many other expenses to account for, it can be hard to imagine what you will need to support not only your children, but yourself. Factor in student loans, car loans, mortgages, and more, and it’s a complex equation that might require a professional’s help. Enter a financial planner, who can help you draft a plan of how to budget for your future.

Or maybe you are just planning a wedding, and need to figure out how to fund your nuptials, as well as how you will combine bank accounts. Life insurance matters now, too, with a spouse as a beneficiary. The advisor will help you balance expenses against your income and help plan for your future, either as a married couple or as a family expecting children.

Planning for Retirement

If you are planning for or nearing retirement, a financial advisor can help you invest and save money. They can help you figure out how much you will need to save in order to retire comfortably. They might recommend a traditional or Roth IRA, depending on your situation, and explain the tax benefits for each. A planner will do just that — help you plan to make the most of what you have saved by retirement.

When you consider you will need an average of almost $740,000 in the bank to retire, it can help to have a financial professional guide you in saving.

An advisor can also help you figure out when and how to file for Social Security. Timing can be important to maximize your benefits, and a planner will help you determine what time is best for you.

High-earners and High Net Worth

If you are a high earner or have a high net worth, having a financial planner is more about managing your money and taking advantage of tax breaks.

First, if you have a large salary, you might simply not know what to do with some of your money. You know you want to invest, but don’t know how to identify a good investment, or even how to invest in the first place.

An advisor can do research for you, and propose various stocks, bonds, and other investments that might interest you and earn money. Properly handled, these investments could pay enough dividends to live off of, allowing you to save money for other purposes, such as inheritance or college funds.

Depending on the advisor, they may also be able to directly manage your investments, moving them around in order to maximize dividends, with as much or little hands-on time from you as you would like. This can take a large responsibility off your plate and put it in the hands of a professional who knows what they are doing.

Those with a high net worth likely have similar problems, with multiple accounts to manage, taxes to consider, and options for how to leave money for the next generation. Investing can help here, too, but it takes a back seat to simply having to manage a large amount of wealth already in place. Remember, too, that having a lot of money can mean being used to spending frivolously, which can harm your credit. A financial planner can keep your spending in check.

Do you need a financial advisor or planner? The answer is maybe. If you don’t know how to handle your money, and want to have a plan for a family or retirement, or don’t know how to handle your high income or high net worth, it may be worth your time to interview a few advisors and see if one is right for you. They can help guide you through making a long-term budget to meet a financial goal, or help you make smart investments. Depending on the advisor, their services might not come cheap, but if you fall in those categories, it’s likely worth the long-term benefits.


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A former newspaper journalist, Cole spends his free time reading, writing, playing video games, watching movies, and learning about every subject under the sun. He lives with his wife and daughter in Idaho. Follow Cole on Twitter: @ColeMayer42

This post was updated December 4, 2017. It was originally published December 4, 2017.