People are always looking for ways to maximize their money. Yet when it comes to financial advisors — whose job it is to make the most of your dollars — the majority of people forgo hiring one. Sometimes it’s because of the cost, or because people don’t understand what a financial advisor can do for them. Whatever the reason, going without a financial advisor could be a costly mistake.
While the quality of financial advisors — and their fees — can vary, they’re generally excellent investments. A financial advisor can provide guidance on how best to manage your finances and help you build your savings, invest your money, and prepare for retirement.
So, should you get a financial advisor? Here’s what you need to know about hiring a financial advisor for yourself.
What Is a Financial Advisor?
According to a CNBC survey, only 1% of Americans use a financial advisor to manage their money. The rest do it themselves, or have a spouse or parent handle it for them. Why? There are several reasons:
- They don’t think they have enough money to invest
- They don’t think financial advisors can help them with debt
- They don’t understand the functions advisors provide
Many people think financial advisors only cater to the super rich. But that’s not the case; financial advisors work with people at every income level. What exactly do they do?
A financial advisor is a professional who manages your money and provides expert advice. They may work for a company or they might be self-employed, but they’re compensated either with a flat fee or a commission they earn when you buy or sell investments or other financial products.
Financial advisors can help you with a wide range of issues, including:
- Retirement Planning: A financial advisor can help you determine how much you need to save for your retirement and how to invest your contributions. As you approach your retirement age, they will also work with you to determine how much you can withdraw to ensure your nest egg lasts for your entire lifetime.
- Investment Allocation: If you aren’t sure how to invest your money or what stocks or bonds to choose, a financial advisor can be invaluable. They will help you pick the right investment mix for your goals and rebalance your portfolio as needed.
- Debt Management: If you have debt, such as credit card balances or student loan debt, a financial advisor will evaluate your finances and create a realistic debt repayment plan.
- Budgeting: As your career progresses and you receive raises or bonuses, a financial advisor can develop a budget to meet your changing needs and goals.
- College Planning: If you have children and want to help them pay for college, a financial advisor will show you how to plan for that expense. They will discuss how much you need to save and what the best savings vehicles are, such as 529 plans.
When Should You Get a Financial Advisor? 4 Scenarios
While a financial advisor can be a valuable resource, many people are intimidated by the cost. Hourly fees for financial advisors are usually between $120 and $300 per hour, and some advisors charge a percentage of the assets under management.
However, hiring a financial advisor can be an excellent use of your money, and can help you get more from your money. If you’re facing one of the following scenarios, a financial advisor can be especially useful:
1. You Have a Major Life Change
You got married. You had a baby. You got a promotion and your salary dramatically increased overnight. If you’ve had a major change in your life, it’s likely that your finances are affected, too. A financial advisor can help you create a new plan based on those changes so you’re prepared for what the future holds.
2. You Need Expert Advice Before Making a Decision
If you’re thinking about making an important decision, such as quitting your job to start a business or buying a rental property, meeting with a financial advisor can help you find out if you’re financially ready.
3. You Need Help Developing a Plan
If you have financial goals in mind — like buying a home or purchasing an investment property — you can work with a financial advisor to develop a plan to help you achieve those goals. A financial advisor can give you an estimated timeline, steps you need to take to make it a reality, and a savings goal.
4. You’re Overwhelmed
Investing can feel like a full-time job, and that’s because it is. Financial advisors and investment advisors spend their days studying the stock markets and evaluating risk — time you can’t possibly spend on your own. If you aren’t sure what investments make sense for your goals or what allocation you should make, a financial advisor can craft an investment strategy for you.
How to Hire a Financial Advisor
If you want to learn how to hire a financial advisor, the first step is to look for one that is a fiduciary advisor. Some — but not all — advisors are bound by fiduciary duty, meaning they are required to work in your best interests rather than encourage you toward products that give them bigger commissions.
It’s also a good idea to hire a fee-only financial advisor. They charge a flat fee for their services instead of working on commission, so they have no financial incentive to push you toward specific products or to buy or sell investments.
You can find financial advisors by searching the Certified Financial Planner Board of Standards’ database.
Managing Your Money
Should you get a financial advisor? For most people, it can make a lot of sense. A financial advisor can help you develop a financial plan, invest for the future, and enjoy peace of mind.
But what about people with student loan debt? If you refinance your student loans with ELFI, you’ll be paired with an expert who can support you throughout the process.
While it’s important to remember that student loan advisors are not the same as certified financial planners, they serve as a direct point of contact to answer refinancing questions and make your repayment journey as smooth as possible. To get started, contact a student loan advisor by filling out a secure form or by calling 844-601-3534.