Do I need a financial advisor or should I Go it alone?

Catherine Brock Contributor

I write (enthusiastically!) about personal finance and investing.

What Does a Financial Planner Do?

Effective financial planners provide guidance that helps you reach your
financial goals. Investment management and strategy is a primary
component of that guidance. You can tap an advisor for a comprehensive
investing strategy and more specific services like:

● Household spending review and budgeting

● Retirement planning
● College tuition planning
● Assessment of and recommendations for insurance protection
● Consultation with estate planners, tax planners, and other
advisors

Financial planners are essentially personal finance mentors. They learn

your situation, provide advice, and guide you towards informed financial
decisions.

Financial Advisor vs. Financial Planner

The terms financial advisor and financial planner are often used
interchangeably in conversation. Technically, though, they’re not exactly
the same thing.

Financial advisor has a broader meaning than financial planner. Advisor

encompasses planners as well as stockbrokers, insurance agents, estate
planners, bankers, and accountants.

Working With a Financial Planner

Your role in the advisor relationship has three main parts:

1. You share your financial information and goals.

2. You evaluate and then accept or veto your advisor's
recommendations.
3. You fund the recommendations you accept.

Before you choose a financial advisor, think critically about your ability to
fulfill these responsibilities. Are you comfortable sharing your financial
details, speaking up when you disagree, and investing money per your
financial plan? Ideally, the answer is a resounding yes.
If you’re not willing to be financially transparent and fund your choices, you
may get limited value from an advisor.

When to Hire a Financial Advisor

One in three working adults and retirees currently consult with a
professional financial advisor, according to a 2022 retirement survey from
Employee Benefits Research Institute. Of those who don't have an advisor
today, nearly half said they intend to work with one in the future.
The cue to engage an advisor is often a significant life event, such as
marriage or divorce. But there are other prompts, too. These include
increased financial complexity, lack of time or investment expertise, and
even disagreement among household members about the shared financial
strategy.

Significant Life Events

Life events that change your financial picture or outlook include:

● Marriage: Combining two sets of finances can get complicated.

Messier still can be the process of setting shared financial
goals.
● Divorce: You may need help recasting your outlook with one
income instead of two.
● Becoming a parent: Kids change the expense structure of your
household and add new financial goals, like paying for college.
● Inheriting money: You've lost a loved one and gained a
windfall. You may welcome outside guidance on investing that
windfall in this stressful time.
● Assuming caregiver responsibilities for an elderly parent: Your
income or expenses may change. You might need to reevaluate
your retirement plan.
● Starting a business: Starting a business has risk. You may need
to balance that risk by getting more conservative in other areas
of your finances.
● Selling a business: Selling a business reshuffles your assets
and probably changes your income. Both outcomes affect how
you should manage money and investments going forward.
● Starting a new job or getting a promotion: An increase in
income unlocks more money to pursue your financial goals.
 You may need guidance on how to invest that extra income
efficiently.

Note that financial advisors can provide one-time consultations, as well as

ongoing guidance. After a major life change, you may only need a
short-term engagement. Typically, the outcome would be a financial plan
you could implement yourself.

For example, say you just became eligible to contribute to your 401(k). You
could choose a financial advisor to recommend initial investment choices
appropriate for your age, risk tolerance, and goals. Then it would be your
job to activate those investment selections and monitor your performance.

Increasingly Complex Finances

Finances naturally get more complicated over time, even without big life
changes. You earn more, invest in your 401(k), contribute to an HSA, buy
life insurance, and so on. One day, you may start doubting your ability to
manage it all.

Financial advisors are particularly useful in this scenario. The good ones
will take a comprehensive view of your assets and identify strategies to
optimize your investment returns, lower your risk, or both.

Lack of Time or Expertise

Managing your money and investment portfolio can be like a second job —
a second job you may not want. If you don't have time for research and
monitoring your portfolio, you can retain an advisor to do it for you. Your
advisor does the tedious work and you get involved when it's decision time.

Similarly, you might not feel comfortable making investing decisions. After
all, investing is a confusing subject. A good advisor can support solid
decision-making and help educate you on best practices of money
management.

Household Conflict on Strategy

Nearly three-quarters of married or cohabitating adults admit to financial
tension in their relationship. That's according to a recent survey by the
American Institute of CPAs.

Money conflicts may prevent you and your partner from moving forward on
a wealth plan. You might retain a financial planner to smooth over those
conflicts with objective, expert advice.

How Much Money Do You Need to Hire a

Financial Advisor?
It's a common question: Do you need a certain net worth to work with an
advisor? Generally, no. Some advisors do enforce net worth thresholds, but
many do not.

Having said that, it probably doesn't make sense to retain an advisor if

you're living paycheck to paycheck. But if you have $100 monthly or
$10,000 monthly available to support your financial goals, you might
benefit from professional guidance. That guidance could be a one-time
consultation to set an investment strategy or it could be an ongoing
relationship.

Pros and Cons of Working With a

Financial Planner
There are clear advantages to working with a financial professional:

● Your advisor saves you time. They can research investment

options and monitor your investment performance so you
don't have to.
● Your advisor is an expert. Depending on your investing
expertise, you may see better investment results working with
an advisor than by managing money yourself.
● Your advisor can keep you from making expensive, emotional
decisions. Emotion can be an investor's worst enemy. Putting
an advisor between you and your money can create the space
you need to stay patient when the market gets volatile.

There are disadvantages as well, including:

● Advisors charge for their services. Some advisors charge

commissions when you buy investments and others charge an
annual fee. Either way, advisor fees reduce your net
investment returns.
● Not every advisor is a good advisor. Choosing the right
financial advisor can be a process. Try starting with our wealth
advisor directory to find a financial advisor in your area.
Interview multiple candidates and check their references. The
 best candidate is one who's financially savvy, of course, but
also personable and trustworthy.

Big Financial Goals but No Plan

Here's what it comes down to: If you have money to invest, financial goals
to pursue, but no definitive plan, it may be time to retain an advisor. The
right one can reduce financial stress, streamline your decision-making, and
guide you to a wealthier future.