Have you ever wondered whether or not you need a financial advisor? Professional advisors say there is no magic asset number that pushes an investor to seek advice. Rather, it is more likely a major life event which motivates a person to seek out an independent financial advisor. Financial advisors generally recommend using an advisor prior to a major life event, such as marriage, having a child, a job change, starting a business or retirement. The reality is most people often make the mistake of waiting too long to make plans financially and start after a crisis –job loss, bankruptcy, divorce, death in the family, or when they’re running out of their retirement money.
Hiring a trustworthy, qualified advisor can actually be the best investment you make. Reliable and quality financial advisers are trained to deal with a variety of personal finance concerns and can help you set priorities to enable you to reach your financial goals, no matter where you are in your stage of life.
Here are some scenarios in which it pays to consider working with a financial advisor:
- Big-Picture analysis: The most helpful task an advisor can assist with is developing a comprehensive, big-picture analysis of your finances. Personal finance is not just one item; it’s made up of many entities: savings, investing, retirement planning, estate planning, tax preparation and more. To succeed financially requires devising some kind of overall plan to address each of these issues in an intelligent and responsible manner. Your advisor will seek input from you as he or she plans each specific area in more detail.
- Defining savings goals: With savings, your options expand. Without savings, your financial options will be vastly reduced. Advisors also know that saving for a reason is far more motivating than just “saving.” Most financial advisors will assist you in developing goals for your savings, both short- and long-term.
- Building an investment portfolio: Most experts agree 90 percent of your investment returns are a function of your asset allocation. This implies how much of your money is invested in stocks, bonds, mutual funds, etc. Unfortunately, some people are too intimidated by all the conflicting investment information they hear to decide upon an asset allocation for themselves. This is an area in which a financial advisor can help.
- Retirement planning: The most important long-term savings goal most people have is retirement. No matter your age, it is important to have a strategy in place that lets you retire at with a known sum of money. But where do you start — a 401(K)? IRA? Roth IRA? Traditional IRA? An advisor will help create a step-by-step retirement strategy involving which account(s) to use, how much to contribute and when to begin taking withdrawals.
- Tax preparation: If you don’t have an accountant or don’t want to do your own taxes, a financial advisor can help connect you with a CPA to ensure your return is done correctly and filed on time.
- Estate planning: Financial advisors will work with you and other professionals in putting together a will and other documents to ensure your estate is divided in accordance with your wishes.
Meet with at least three candidates, and do your own due diligence in verifying their credentials and making sure their specialty matches your needs. Are you looking for someone to help plan your retirement, or do you need someone to help manage your newly married financial situation? Ensure that the advisor’s expertise caters to your financial goals.
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