What follows are the main reasons to consider getting a financial advisor to handle your investments, as opposed to managing these yourself.
Financial advisors have specific expertise that can help you navigate what can be complex financial decisions. They provide personalized advice tailored to your situation and goals. First, your advisor will want to know what you hope to achieve in financial terms. These will include how much to save and invest, how much you want to have when you retire, and so many other financial decisions from insurance and taxes to buying homes and cars and even setting aside savings for your children’s education.
The goal-setting process will take the form of a lifetime roadmap, but flexible enough to be modified for emergencies, job changes, marriage, and other unforeseen events that come up throughout our lives.
Early on, your advisor will want to assess your risk-tolerance level. Some people don’t want to worry about their principal investment losing money, and even temporary fluctuations can rattle people and cause them to lose sleep. Others, especially young people, have a lot of time for market fluctuations to straighten out, and they recognize that taking some amount of risk means their overall returns will be higher over the long run.
Knowing that a professional is handling your finances can provide peace of mind, especially during uncertain times. If you have a busy schedule, offloading the burden of planning and shifting your portfolio investments allows you to have more time for the other things that you would rather be spending your time doing.
Choosing a Financial Advisor Can Be a Major Life Decision
What qualifications should I look for in a financial advisor? Besides this article you’re currently reading, you should research other online resources relating to personal investing. One that I recommend is Empower (https://www.empower.com). Empower is a mix between a financial advisor aided by technology, and apowerful investment tool with a financial management dashboard free for anyone to use.- Education, such as a degrees in accounting, finance, economics, or business.
- Licenses and registration.
- Certifications, such as certified financial planner (CFP) and registered financial planner (RFP)
- Designations and skills, including any areas of specialization.
- Experience working in the financial industry, at least 10 years is good experience.
- Testimonials and references from previous clients. Take time to dig into this one.
Six Common Mistakes People Make When Choosing a Financial Advisor
1. Hiring an advisor who is not a fiduciary. A fiduciary is defined an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and must also disclose any potential conflicts of interest.Summary
A financial advisor will cost you money, but the value they can bring to a complicated part of your life will be well worth it, particularly if you haven’t been exposed to education and experience in such things as investment management, budgeting, taxes, retirement, saving for your children’s college tuition, and estate planning.In addition, the interaction you have with your advisor will be your own personal financial education acquired over time. Your financial literacy will improve and your partnership with your advisor will result in both of you gaining understanding, codifying and pursuing an increasingly crystalized set of goals that will provide both wealth and financial independence.