The Tell-All Series: Do I Need a Financial Advisor?

We’ve outlined the different ways in which financial advisors make money, looked into the differences between a broker and registered independent advisor (RIA), and discussed what value a GREAT advisor offers to their clients.

While helpful, it might not help you understand if YOU fit the description of someone that needs an advisor?

In this blog, you can take a look at several  profiles, each with different personal financial situations and needs. These examples are not meant to be recommendations or to cover every scenario under the sun, but rather to serve as a starting point on the journey of financial awareness.

Does Sarah need a Financial Advisor? No

Sarah is young, has no debt, no dependents or partners and she is saving every month. Instead of spending the $1,000 she might spend on an advisor, she should contribute this amount directly towards building an emergency fund. If she wants to get more organized, she can download our free budget excel spreadsheet, use free online finance software options like Mint and read our guides to educate herself as her life stage starts to change. 

Do David and Rachel need a Financial Advisor? Probably…

After they marry, their individual finances merge, and considering the number one cause of stress in relationships is money, a great financial advisor can help set some good financial habits as a couple from the start.

At this stage, there is probably no need to hire an advisor that manages their investments, as most of their savings are in their current 401k plans. Hiring an advisor on a retainer is probably best in their case since their investable assets are below $50,000.

The advisor’s expertise should include holistic financial planning for young couples, consolidation of student loan debt, and counsel on short-term goals such as buying a house and building a more robust emergency fund. 

Do Mark and Kerry need a Financial Advisor? Yes, they could definitely use one!

Mark and Kerry could use a great advisor that can help them with their budgeting and debt consolidation. They are in dire need of saving towards an emergency fund before they even get started on student loan repayments or retirement planning. Considering that they have a young child, the advisor can also help them find the appropriate coverage of their term life insurance.


Do Steve and Jon need a Financial Advisor? Yes, for investment advice

Steve and Jon have their monthly expenses well under control, but they could use a financial advisor that has strong experience in retirement planning and investments. A great advisor can improve their haphazard portfolio by incorporating their personal risk tolerance and goals to construct a portfolio with realistic return expectations. He or she can also examine the investment fees and investment taxes that they are currently paying to ensure they are being cost and tax-efficient. Lastly, a great advisor can educate Steve & Jon on the importance of setting up a Power of Attorney and a Will and can connect them with the right Estate Advisor to do so. 

Do Dave and Claire need a Financial Advisor? Yes!

Dave and Claire should look for a financial advisor that has strong experience in retirement planning and investments. A great advisor can help them take a more strategic approach to their investment portfolio by analyzing their risk tolerance and adjusting the risk/return profile of their portfolio. He or she can help them set realistic expectations of the income they will receive when they retire in 10-12 years. The advisor can also educate them on the importance of, and the steps involved in, setting up a proper estate plan.

How To Know When You Need Financial Advice

Perhaps you can relate to one of our profiles? Perhaps not. The point, however, is that no matter what life stage you are in, you can always use some help to improve your situation. But that does not mean that everyone should hire a financial advisor!

When your money is more valuable than your time, which tends to be when you are younger and have less income, it might make more sense to educate yourself on how to develop good saving habits, rather than doling out money to hire an expert. As your income rises and your life becomes more complicated (in a good way) with marriage, children, homeownership, etc., time becomes a scarce resource and it might make more sense to outsource the task of the household CFO by hiring someone to help you.

We hope this blog series has helped you to better understand financial advice and planning, and that you feel a little more empowered than you did before you read it! To start from the beginning of the series, click here

If you enjoyed this post, check out How To Interview a Financial Advisor.

Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

See The Top Local Financial Planners Near You