When You Should Use a Financial Advisor — and When You Can Skip It

Advisor showing and discussing some data with her clients.
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Financial advisors can be immensely helpful. However, knowing when to use a financial advisor can be just as beneficial to your overall situation. For example, if the idea of reaching out to one is as daunting as your current financial situation, it could be a good idea. 

Not all scenarios actually call for a financial advisor, of course, while some could end up going either way. Here’s a look at some advice from financial pros who break down when it might be time to start looking for some professional assistance, and when it’s probably better to go at it alone. 

When to Use a Financial Advisor

Emotions often factor into financial decisions, which can lead to varying results. If you’re feeling emotional about your, specifically stress, hiring a professional can help immensely. “Utilizing an advisor takes the emotions out of financial decisions,” Mark Parker, VP of Strategic Growth at BIP Wealth said. “Studies have shown that many personal investment decisions are driven by emotions. Past experience can influence decisions to be based on fear or ego and can often lead to unfortunate results.”

Time is another important factor when it comes to money management. While a lot of personal finance can be handled, that’s not always the case, as Certified Financial Planner and founder of Live, Learn, Plan Jay Zigmont explained. “As your financial situation becomes more complex it can be helpful to have help. A Certified Financial Planner can help you learn how to manage your own money or serve as a second set of eyes also.”

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Complex tax situations, such as employee stock options, are another example of when it might be time to hire a pro. “Working with a CFP professional means you can get both investment advice and tax planning. The same goes when you get a large inheritance or have a large life event. True comprehensive financial planning will work through your current money management, investing, taxes, retirement, insurance, estate planning, and more.”

When it Could Go Either Way

If you’re debating whether or not you actually need a financial advisor, there’s a chance your situation might not necessarily call for it. If you’re able to grasp all the elements of your portfolio, regardless of how complex it is, then it may not even be necessary. 

“If you are good at money management, investments, and wealth management but want a second opinion, you can seek financial advice from a financial advisor,” Lyle Solomon, an attorney, and payday loan crusader, said. If a second opinion isn’t necessarily your thing, Solomon says “you can avoid” hiring an advisor. 

Another obvious consideration is weighing the potential cost against the benefits. If hiring an advisor is something that’s affordable and could help untangle a few knots, then it may be a good idea. If it’s something that might be tricky to budget for or you don’t have any pressing financial issues you need clarity on, it might be something you can avoid — at least for the time being.  

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When to Not Use a Financial Advisor 

Though not all circumstances will call for a professional’s paid expertise. It’s not necessarily cut-and-dry, so there are a few factors to consider. “You can avoid using a financial advisor when (a) you are confident in your ability to make your own investment decisions, (b) you don’t need assistance in managing your portfolio, (c) you’re not interested in tax planning tactics, (d) you aren’t on the verge of retirement, (e) the financial advisor does not have the required expertise,” Solomon said. He also explained the type of time commitment that can go into more complex financial management. 

“Ask yourself if you want to focus on money management,” Solomon said. “It’s not a part-time job. It’s not something you can do on the weekend and then forget it. If you are not serious or interested in money management, it’s pointless to use a personal finance advisor.”

Of course, if you have the free time and an eagerness to learn, that’s always an option, as well. “You should debate getting the help of a CFP® professional when you might be able to learn it yourself and have the time to learn,” Zigmont said. “You may not do it perfectly, but just remember the general rule to not invest in anything unless you understand it. You should learn what, how, and why you are investing. Keep in mind tax considerations, which change constantly.”

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