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4 Questions to Determine if you Need a Financial Advisor Thumbnail

4 Questions to Determine if you Need a Financial Advisor

Investment Financial Planning

If you want to maintain your standard of living and avoid outliving your money, investing can be a great way to continue to grow your nest egg as you approach — and enter — your retirement years. And while there may be many robo-advisors who can automate investment management by using computer algorithms, the one-on-one, hands-on approach and personal advice and guidance you get when working with a real-life financial advisor often  will produce  better insight and clarity throughout the investment process.

According to a 2019 survey of the CFP Board’s [Certified Financial Planner Board of Standards, Inc.], 55 percent of adults believe a recession will occur in the next year but those who have enlisted the help of a financial advisor and have a written financial plan, feel more confident that they can weather an economic storm.Nearly two-thirds (65 percent)  working with a financial advisor versus one-third (38 percent) without an advisor said they feel more prepared now for a potential recession than they did in 2008.1    

An increasing lifespan could be one of the many reasons people are more interested in professional help when it comes to effectively managing their money.  While approximately 30 percent of U.S. households have a financial advisor,2 Cerulli Associates, a research firm that specializes in global asset management analytics, found that investors who are nearing retirement are more likely to hire one.2 According to their findings, about 40 percent of individuals in their 60s have a financial advisor.2

From developing tax-efficient diversified portfolios that match your needs and objectives to factoring in your risk tolerance and timeframe, there are a variety of factors your advisor will consider when designing your customized investment strategy. However, before you hire a financial advisor to help you grow your assets, it’s important to first ask yourself these four key questions.

1. How Complex is My Situation?

While a financial advisor can be helpful in any situation, hiring one is usually more necessary when you have complex issues and questions to sort out. Things like: when can I retire, when should I take social security, how do I create a diversified portfolio, investing assets of your small business, or retirement distribution strategies require more in-depth insight. Even if you’re simply looking for straightforward advice that you can apply on your own, many financial advisors offer hourly planning advice that could save you some time and money in the long run. Especially if you’re about to experience a transition — such as the birth of a child, a marriage or divorce, a new job or retirement — teaming up with an advisor can help guide your decisions as you enter new financial territory.

2. How Much Can I Afford To Invest?

Before deciding to engage with an financial  advisor it’s important to first consider how much money you have to invest. Some financial advisory firms require you to have a minimum amount of "assets under management" (also referred to as AUM) before they will take you on as a client. However, if you find an advisor you really want to work with, it is always worthwhile  to reach out and talk to them. Even if their firm turns out not to be the right fit for you, they often can recommend another advisor for you to work with.

In some cases, financial advisors also now offer their own versions of robo-advice, for clients who are still accumulating assets and don't yet meet their AUM minimums. Again, it's worth it to contact the firm in question and find out what they recommend!

3. What Are My Goals?

This may seem like an obvious question, but some people look past it and end up in an undesirable situation. If you’re someone who is certain you want to invest for the long haul, then hiring a financial advisor can give you the accountability you need to achieve your investment objectives. It's always a good idea to identify your investment expectations first before you get wrapped up in a long-term commitment.

4. How Do I Select a Financial Advisor?

Some people would rather plan and save the money themselves. However, a financial advisor is valuable in that they can educate you, as well as apply their knowledge, to help you make smarter investment decisions. At the end of the day, an advisor is an investment in itself, so you’ll want to think carefully about who you hire, their experience and the quality of advice they offer.3 Make sure that the advisor aligns with your needs and is someone you are comfortable talking to and want to work with.

And maybe the two most important questions to ask: First, is the potential advisor a fiduciary?A fiduciary advisor is required to place the interest of their client above their own and avoid potential conflicts of interest -- even when it means they make less money.

Second, will the advisor agree to a fiduciary relationship in writing? If they do not give a straight yes or no answer to this question, take it as a sign something is not right. Think about it -- any true fiduciary will not hesitate to offer a written fiduciary pledge.5

Why make investing harder than it has to be? A financial advisor will put you in a better position for making good financial decisions for the short- and long-term.


1.https://www.cfp.net/news/2019/10/new-research---americans-working-with-a-financial-advisor-are-more-prepared

2. https://www.guidevine.com/roundtable/new-data-shows-growing-financial-advisor-shortage/

3. https://tobininvestmentplanning.com/financial-tips/questions-to-ask-your-financial-advisor

4. https://tobininvestmentplanning.com/financial-tips/search/fiduciary

5. https://tobininvestmentplanning.com/about-us/why-fee-only