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Posted by Jessica Ozar (MONEY FORUMS: 2, Answers: 18)
Asked on October 28, 2015 12:01 pm
Hello Jessica, very good question! There are many types of advisors. Some advisors focus on specific areas, such as retirement planning, education planning, or insurance. There are also comprehensive advisors who look at a person's entire financial situation. Very often we associate advisors with investment advice, but this is only a small piece of managing our financial lives. The financial world is complex and changing, a good advisor can add value not only is recommending and monitoring investments but can also make recommendations in all areas of personal finance. This would include insurances (property insurance such as auto or homeowners/renters as well as life and disability). It would also include cash flow and budgeting, tax planning, and estate planning. One of the complexities of finance is that everything is related, when you make a change in one area it generally impacts several other areas. For example, increasing contributions to a retirement plan not only changes my retirement picture but also changes my cash flow (budget) and my tax picture. For many people these are things they can figure out, with help of resources like CentSai. While many wealthy people use financial advisors far more people could benefit from an advisor relationship - as long as they chose the right advisor. The positive impact of an advisor relationship can make a greater difference in the lives of people with fewer resources - small changes can have a drastic impact in the quality of their financial lives. Wealthy people will probably be okay either way, they'll do better with a good advisor but they were going to be comfortable anyway. The great thing is that you are asking - by examining where we are and where we want to be, along with our options for getting there, we can make informed decisions that propel us towards our destination. Perhaps an advisor relationship is the right thing now, perhaps later. The important thing is to keep an open mind to options, know your own situation thoroughly, and make the best decision you can at the time. Then change if it doesn't work the way you want it to!
Hi Jessica, I think that almost everyone could take the time to learn the financial skills necessary to succeed, but not everyone has the interest. If you have a decent net worth (like $250K+), you might find that a financial adviser is really helpful for you (be sure to ask how they get paid, and what their credentials are). At a lower net worth, you might really prefer some help from other sources. Perhaps you just want tax help in which case paying a CPA is a great choice. Maybe you need help developing a strategy to pay off debt, then a money coach could help you out. If you end up paying a professional to help you with anything, but especially with insurance or investments be sure that you understand how they get paid, and why they recommend certain products. Also, watch out for people who call themselves financial advisers but are only insurance salesmen. You should be looking for a certified financial planner if you need help with investing.
Hello Jessica, this is a good question. Indeed, a financial advisor brings a lot to the table but only after you have done some reasonable soul-searching yourself on what your broad goals are. Only you know where you want to be, financially, in 5, 7, 10 years time. Accordingly, your advisor will recommend you certain groups of investments for you to grow your savings. But please ensure that you and your advisor are in constant communication, at least every six months, to ensure your goals are on track. Good luck!