Managing money is something that you might think you need to do on your own. A lot of people hear the term financial advisor and assume that only a rich person could afford to hire someone to manage their finances.
At Addition Financial, we’re here to tell you that hiring a financial advisor is smart even if you’re not wealthy. In fact, it’s one of the best ways to get your financial house in order and set yourself up for future financial independence.
With that in mind, here are some of the benefits of hiring a financial advisor.
A Financial Planner Can Be Objective About Your Financial Situation
Let’s face it, it can be nearly impossible to maintain objectivity about anything in your personal life. When you’re close to an issue and deeply involved in it, you may not be able to see the big picture.
When you hire a financial advisor, you get the benefit of an objective second opinion about both your current financial status and your future prospects. An experienced advisor can look at where you are financially and help you see your situation with clear eyes and a fresh perspective.
Likewise, your advisor can help you see the way ahead and provide an objective opinion of investment opportunities. In other words, they’re a second set of eyes on your finances – and that’s a good thing.
A Financial Adviser Has Experience That You Don’t
The second of our benefits of hiring a financial advisor is that when you hire someone to manage your finances, you get the benefit of their years of training and experience. Most of us don’t understand the ins and outs of investment and financial planning. A good financial advisor will bring all their knowledge to bear when advising you on how to reach your goals.
In addition to a bachelor’s degree, financial advisors are required to pass tests administered by the Financial Industry Regulatory Authority (FINRA). These exams include the Securities Industries Essentials (SIE) exam as well as other certifications.
Passing tests is a minimum requirement for financial advisors. The person you hire should be someone with experience. They can help you choose the right investments, manage your risk levels and plan for your long-term financial goals.
A Financial Advisor Can Help You Minimize Your Tax Burden
An issue that looms large for anybody who’s trying to save for a comfortable retirement is taxation. There are decisions you can make now that will have a significant impact on your post-retirement income and comfort. An certified financial advisor can help you evaluate your options and make the right choices for you and your family.
In some cases, it may make sense to pay taxes before you invest money, so that you’ll be able to withdraw money tax-free after you retire. In other cases, deferring tax payments now can help you build your nest egg quickly.
A financial advisor can also advise you about donations, tax deductions and exemptions. Taking the right deductions can help you to add to your investment income – and as a layperson, you may miss things that would be clear to an experienced advisor.
A Financial Advisor Can Help You Take a Holistic Approach to Planning
Are you putting enough of your time and energy into considering the full picture of your finances? There’s a good chance that you aren’t and a financial advisor can help you take a step back to see all the working parts of your finances.
It’s easy to get caught up in your everyday finances and lose sight of things like wealth accumulation and retirement. By working with a financial advisor, you can keep an eye on everything from monthly budgeting to setting up college accounts for your kids to planning for an early retirement.
You’ll have the best chance of achieving your long-term goals when everything is taken into consideration, including insurance planning, tax planning and investment strategy. Every aspect of your finances can be positively impacted by hiring a professional financial advisor.
A Financial Advisor Can Increase Your Return on Your Investments
The stock market isn’t just for rich people but it can be difficult to evaluate investments and make the right choices for your long-term needs without help. Financial advisors have experience choosing investments on behalf of their clients and they can help you narrow your options and pick the best investments for your needs.
A good advisor will help you diversify your investment portfolio and balance your desire for growth with your need for financial stability – aka your risk tolerance. They can also help you by evaluating your portfolio periodically and letting you know if you have too much money in one investment.
Keep in mind that any potential financial advisor should be willing to share information about the average ROI they achieve for their clients. It doesn’t make sense to hire a financial advisor if they can’t provide a return that’s more than what you pay them.
Download Now: Expert Strategies for Setting and Sticking to Your Retirement Investing Goals
A Financial Advisor Can Help You Manage Market Risk
Just as a financial advisor can increase the return you earn on your investments, they can also help you avoid unnecessary risk. That’s an important consideration when you think about the volatility of the stock market.
A study found that the top priority for 74% of financial advisors was helping their clients preserve wealth and manage risk. The most common risk management strategies include:
- Stock diversification
- Active portfolio management
- Regular risk assessments
- Goals-based investing
The rules have changed a bit in the past 20 years or so. It used to be that a passive investment strategy could work well but the market’s volatility in recent years has led to a more active investment approach for many financial advisors.
A Financial Advisor is Always Watching Your Money
Very few of us have the time or inclination to keep eyes on our money on a daily basis. We have jobs and families and other obligations that make it difficult to carve out space to take an active role in money management.
That’s not the case with a financial advisor. You’ll be paying them to take a hands-on approach to managing your finances. They can keep an eye on your money and on the markets and take quick action if and when it’s needed.
This doesn’t mean, of course, that you should never look at your portfolio. We would recommend at least a monthly review to see where things are. It’s always a good idea to keep a hand in your portfolio, so you can ask questions and understand your financial situation.
A Financial Advisor Can Help You Protect Your Family
For a lot of our Addition Financial members, protecting their families is a priority. They want to be sure that their kids can go to college and that their families will be protected if something happens to them.
The only way to achieve those goals is with competent financial planning. When you hire a financial advisor, they will ask about your long-term goals and what you want for yourself and your family. Then, they’ll help you put mechanisms in place to ensure that your family is protected.
Remember, your financial advisor can do more than help you accumulate wealth. They can assist you with tax planning, estate planning and more. If you want to leave money to your children, they can help you make decisions about setting up trusts. They may also be able to recommend other professionals, such as tax accountants or lawyers, to help you lay the groundwork to protect your family.
Hiring a Financial Advisor Provides Peace of Mind
One of the biggest benefits of hiring a financial advisor is that having someone on your team with the experience and knowledge to protect your assets and grow your portfolio can provide you with peace of mind.
Managing money can be stressful. Money issues can easily turn into relationship issues. When you’re anxious about money, the stress is likely to impact every area of your life from your work to your interpersonal relationships to your sleep and health. Wouldn’t it be nice to be secure in the knowledge that your money is in good hands?
Ultimately, the peace of mind you can get from hiring a financial advisor is worth what you pay them. When you have an experienced professional on your team, you won’t need to worry about what’s happening with your investments. You’ll need to be involved to some extent but certainly not the degree that you would if you were trying to manage your money without assistance.
Fiduciary Financial Advisors Must Act in Your Best Interest
We’d be remiss if we didn’t mention the importance of choosing a fiduciary financial advisor to manage your money. Fiduciaries are legally obligated to act in your best interest even when it’s not in their best interest.
What that means is that they can’t recommend an investment that isn’t ideal for you just because they’ll get a commission on it. They must keep your needs and financial security at the forefront of every decision they make.
If you want to achieve financial security and meet your long-term goals, the benefits of hiring a financial advisor are clear.
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Posted on Apr 21, 2021
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