With so many do-it-yourself personal finance tools at your fingertips, you might not even consider the need to enlist the help of a real-life financial advisor. From getting out of debt to investing in your retirement, how can you tell which financial milestones are worth the time and money of a professional? Here’s what to know about the value of calling a financial advisor, and what sort of major life events warrant the help of a professional.
Reasons to invest in a real financial advisor
First off, let’s review the basics of some of the services that a financial advisor can provide: They might give advice for unexpected financial issues, set up investments, identify the best financial vehicles for you (such as insurance policies or mortgages), and generally assess your current financial situation and future goals.
However, the reasons above might not immediately strike you as worth the cost of hiring a financial advisor. According to Nerd Wallet, the typical cost of a financial advisor depends on how much money they manage for you—around 1% of your account balance for an in-person financial advisor, compared to 0.25% to 0.50% for a robo-advisor.
Although hiring an advisor is cost-prohibitive for many, there are plenty of major life events where a real, human advisor would be well worth the investment:
Your family situation has changed. Marriage, kids, divorce—whether your family is growing or shrinking, your financial situation is surely changing along with it. A financial advisor can help you manage your finances when your taxes change, you need to start saving for college, you’re questioning an estate plan, and more.
You’re embarking on a career change. Maybe you’re switching industries, or starting to freelance, or opening a new business. When you decide to change the way that money is coming in, talking to a financial advisor is a wise move to help you navigate the transition and save yourself a lot of time and headaches.
You’re taking on a major purchase. Buying a house is the go-to example of a purchase that calls for the help of a professional. An advisor can help you prepare for the mortgage process.
You’ve suddenly come into a large some of money. If you recently inherited more money than you know what to do with, a financial advisor can help you find a way to start managing it.
You’re nearing retirement. This is a classic stage when a financial advisor is necessary to help you make decisions about accessing and using Social Security, pension funds, Medicare and your retirement accounts as well as how to manage income during retirement.
Even if you don’t fall neatly into any of the scenarios above, it’s normal to simply feel overwhelmed at the idea of planning your finances. A financial advisor can provide a much-needed human touch while giving you their professional opinion, helping you get back on financial track.
Questions to ask yourself before “doing your own research”
As simple as personal finance can seem, the major life events that warrant a financial advisor might also impact your financial decision-making. Before making a decision, ask yourself these questions:
Do you have any expertise when it comes to investments and investment vehicles?
Are you able to research and stay up-to-date on financial topics and specific assets?
Do you have the time to monitor, evaluate, and make periodic changes to your portfolio?
It’s important to be honest about your own limitations when it comes to your longterm financial decision-making. If you do choose to invest in a financial advisor, you should do your own research about whose help you’re enlisting. Be sure to read up on the difference between fee-based vs. fee-only advisors, as certain financial advisors may not have your best interests at heart. After all, when it comes to finding the right financial planner for you, the last thing you want is to get ripped off.