5 Signs You Need a Financial Advisor
Despite their concerns, most Americans are trying to overcome their financial challenges and fears on their own. Nearly 65% percent of adults are taking a self-directed approach to planning, according to the 2021 Fidelity Investments Couples & Money Study.
“When people get sick they go to a physician. When people get into legal trouble they go to a lawyer,” said Robert Johnson, professor of finance at Creighton University’s Heider College of Business in Omaha, Nebraska. “Yet people somehow believe that they can navigate the complex financial markets without the assistance of a professional.”
Perhaps you need the help of a financial planner but don’t realize it. Johnson said there are several signs that you should hire a professional to help you with your finances. Here are the five main indicators.
1. You Earn a Decent Living but Don’t Have the Discipline To Save
Johnson said one sign you need the help of a financial professional is if you are progressing in your career and earn enough to set aside money for retirement, but can’t develop the discipline to invest for the future.
Many people fail to take the steps to save for themselves if they do not have a financial advisor holding them accountable, said Michael Hardy, a certified financial planner and president of Ocean Wealth Group in Williamsville, New York.
According to the Fidelity study, while a top financial concern of both millennials and Gen Xers is saving enough for retirement, 51% of couples disagree on how much savings is needed for retirement.
A planner will help you create a budget so you can determine how much you can set aside. Advisors also help you figure out how much risk you are willing to take and how much you should take when it comes to investing. Then, the advisor can “structure a savings and investment plan that is objective and realistic,” Johnson said.
2. You Are Not Sure You Save Enough for Retirement
Without knowing how much you need to save, it is hard to create a plan to set aside enough for a comfortable retirement.
Over 50% of couples who responded to the Fidelity study admitted that they don’t know how much they need to save for retirement to sustain their current lifestyle.
“Unfortunately, most people are not saving nearly enough to be able to retire when they would like to,” Hardy said.
This is especially a problem for those nearing retirement. Hardy said he has seen this personally. The biggest concern of older adults who come to him for help is whether they will have enough assets to live a comfortable retirement, and, if not, what they need to do to get there. A planner can help you figure this out.
3. You Do Not Know How To Build an Investment Portfolio
“Very few people feel confident enough to put together their own portfolio that takes into account risk tolerance, costs, asset allocation and time frame,” Hardy said. “It can be complicated for the average investor.”
According to the Fidelity study, 40% of couples disagree on how much risk they are comfortable taking on in their investments, which can greatly affect their potential earnings.
The investments you choose can affect how much money you’ll have in retirement. “I am amazed that some young individuals with a very long time until retirement choose very conservative asset allocations,” Johnson said. “This can cost them hundreds of thousands of dollars when it is time for them to retire.”
A financial planner can help you create an investment portfolio that will help you reach your goals. A good advisor won’t use a cookie-cutter approach, either. The portfolio will be based on your risk tolerance, age and other factors, such as your tax bracket.
4. You Do Not Know How To Create a Long-Term Plan
Unfortunately, many Americans do not have a financial plan.
Creating a financial plan can be difficult because most people are uncomfortable examining their own financial situation, Hardy said. “Sometimes it is easier and less stressful for someone else to create a plan and hold us accountable than doing it on our own,” he said.
If you’re confused about how to set financial goals and what you need to do to achieve them, a financial planner can help. “A financial planner will help you look holistically at all of your assets and help you develop a plan that is right for you,” Johnson said.
Advisors create a plan based not only on your investments such as stocks and bonds, but also on assets such as real estate, life insurance and even your own human capital, or earning power.
In fact, the Fidelity study found that couples who work with a financial advisor are up to 19% less concerned about common financial stressors, such as saving and paying off debt, than those who do not work with a professional.
5. You Are Afraid You Will Lose All Your Money in the Stock Market
This sort of fear can lead people to avoid investing altogether, financial experts say. Or it can cause people to jump in and out of the market, which can hurt their returns over time.
“The short-term vagaries of the financial markets should not change your long-term investment plans,” Johnson said.
If recent events in the market have changed your feelings on how you should invest assets, you need a financial planner, Johnson said. A planner can help ease your fears and create a diversified portfolio that will allow you to ride out the ups and downs of the market.
How To Hire a Financial Advisor
Many people mistakenly assume they can’t afford to hire a financial professional, Johnson said. “It is my belief that the return on investment of enlisting the help of a financial professional is one of the best investments the typical individual can make,” he said.
Johnson recommends looking for professionals with designations such as CFP, chartered financial analyst (CFA) and chartered financial consultant (ChFC), to name a few. These individuals must meet strict standards to receive these designations and must abide by ethical codes.
Good To Know
You can find some planners that charge by the hour, such as those in the Garrett Planning Network. It is usually best to stick with fee-only planners who do not work on commission. You can find a fee-only fiduciary financial advisor near you through the National Association of Personal Financial Advisors.
Cynthia Measom contributed to the reporting for this article.
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- Fidelity Investments. 2021. "2021 Couples & Money Study."