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Do I need a financial advisor?
Managing finances and investments can sometimes feel overwhelming, even for people who are good at it. If this sounds familiar, you might be thinking about hiring a financial advisor to help.
A financial advisor* does more than just offer financial and investing advice. They can help you create a comprehensive financial plan that encompasses all aspects of your life, including budgeting, saving, investing, taxes, retirement planning, estate planning and insurance planning.
A financial advisor can also help you set short-term and long-term goals and devise strategic plans to reach them. These might include building an emergency fund, saving up to buy a car or take a vacation, putting your children through college or maintaining your lifestyle during retirement.
When is a financial advisor right for you?
Encountering big life changes and milestones are often good times to hire a financial advisor. For example, maybe you’ve recently landed a new job, and with it a higher income. Perhaps you’ve received a large inheritance that you’re not sure how to manage. Or you may have gotten married recently or started a family. These are all situations that a financial advisor can help you manage.
A financial advisor with the right expertise and credentials can assist you during key life events and transitions. Here are some examples of when you might benefit from using a financial advisor.
1. Getting married or divorced
Whether you’re starting newlywed life or going through a divorce, you’re not just navigating new emotional and relationship landmarks. You’re also dealing with complex financial factors.
A financial advisor can help you make informed decisions about individual or joint bank accounts, investment accounts and merging or dividing assets.
2.Getting a raise
Whether your bank account is growing because you got a promotion or you changed jobs (or both), you may find yourself wondering about the best way to save and invest your money.
Working with a financial advisor can help you answer questions such as:
- How much should I put into a 401(k) or other employer retirement plan?
- How much should I have in savings?
- How much should I put toward paying off debt?
- How much should I set aside in an emergency fund or for other goals?
3. Nearing retirement
The closer you get to retirement, the more questions—and financial anxiety—you might have. You may wonder: Do I have enough money to retire? How can I save more? What can I do to make my money last as long as possible?
These questions bring up a larger one: Do I need a financial plan for retirement? As you assess your needs, know that a financial advisor can help you determine:
- What your ideal retirement looks like
- The right time for you to apply for Social Security benefits
- Your preferred withdrawal strategy and continued investment options
4. Receiving an inheritance
Inheriting money can be a life-changing event, leaving you with many decisions to make, such as how to carry on the legacy of the deceased and how to ensure the new funds enrich your life instead of burdening it.
A financial advisor can take an objective look at your inheritance and help you establish your priorities, which may include:
- Paying down debt
- Adding to your emergency fund
- Saving in your retirement accounts
- Tailoring an investment strategy for your financial goals and risk tolerance
- Increasing your charitable contributions
5. Buying or building a new home
The process of starting fresh in a new home is thrilling—and sometimes overwhelming. Before you break ground or make an offer on a new house, it’s important to assess the risks and long-term financial commitment that comes with owning real estate.
A financial advisor can walk you through the budgeting process and advise you on how to balance the costs of homeownership with your other financial goals.
Are financial advisors worth it?
Financial advisors may provide value if you want to create or update your financial plan, or if you’re going through a life transition where you could benefit from objective financial advice. They may also provide value if you feel overwhelmed or inadequate when it comes to managing your personal finances.
A financial advisor may help you identify further opportunities to work toward your goals and stick to your financial plan, freeing you from the stress of doing it yourself.
Choosing the right financial advisor
A financial advisor often provides more than just stock market recommendations. They may be able to advise on multiple areas of your financial life, such as retirement planning, education funding for kids or grandkids, or charitable giving. You may feel confident in one aspect of your financial life and still tap into an advisor’s expertise for another area.
Here are a few factors to consider when choosing a financial advisor:
- Areas of expertise. Some financial advisors specialize in certain aspects of financial planning, such as estate planning, investing, saving for college or retirement, or tax planning. Ask advisors if they possess any specialized expertise that would be relevant to your goals and needs.
- Credentials. Financial advisors may possess different credentials based on their training and education. Some of the most common credentials include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC) and Chartered Life Underwriter (CLU).
- Fees. Financial advisors use a variety of different fee structures, including flat fees, transaction fees, commissions and a percentage of the assets under management (AUM). For example, an advisor might charge 1.5% of AUM up to $150,000 and a slightly lower percentage as AUM rises. Ask advisors about their compensation structure and make sure it’s straightforward.
- Flexibility. Is the advisor available to meet and work with you in format convenient to you?
- Fit. Choosing the right financial advisor is about more than just looking at technical qualifications. You should also look for someone who has a similar financial philosophy and feels like they would be a good fit. Your financial advisor will become one of your most important partners, so try to choose someone whose personality and style will be a good fit with yours.
- Fiduciary status. You may want to inquire whether a financial advisor is working under the fiduciary standard, which means they must make recommendations that are in your best financial interests.
If you need a financial advisor, you don’t have to look very far. Start working with a financial advisor from U.S. Bancorp Investments today and create a strategy customized to your financial goals.
*For purposes of this content, a financial advisor is required to register with the SEC, which grants the Registered Investment Advisor (RIA) title. Financial advisors are legally obligated to act in your best interest and disclose any conflicts of interest related to managing your finances. It is possible to hold multiple titles; for instance, an advisor might be a CFP as well as an RIA. Always verify the title of a professional before you seek guidance.
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