Want to jump into the world of investing, but don't have the time to learn all there is to know? Well then, you might appreciate the benefits of a financial advisor!
If you're interested in learning how a financial advisor can help you, and if they are worth paying for, then you've come to the right place. Keep reading to discover the benefits of a financial advisor.
You may also want to read this article I wrote about The Big Picture of Investing, and why we need to do it.
Why Do I Hire a Financial Advisor?
In a financial utopia, all of us would either possess the knowledge to properly manage our own investments, or have a great financial advisor at our disposal at all times.
Well…often we have neither of those…boo.
While I would certainly recommend you educate yourself on the ins and outs of the investing world, I get that a lack of time (or interest) can make that pretty challenging. There is, after all, a lot to learn. The good news is, that's why financial advisors exist!
However, not all of them are created equal (for a variety of reasons). But, if you're able to get a good one, they can be very helpful.
Additionally, one other hitch you may run into is that an investment advisor might not work with you if you don't have enough money to meet their minimum capital threshold. But don't fret, if you don't have enough money to work with an advisor, you have some other options.
You can invest in something like a Retirement Date Target Fund or even directly into an Index Fund ETF (that invests your money in the market as a whole).
You can also sign up for one of those new fangled Robo-Advisors, and have a computer make your investment decisions. Seriously…it's a thing!
If you want to get a very good understanding of how the (often shady) world of Financial Advisors works, you should read chapter 5 of this book by Tony Robbins and Peter Mallouk. It will help guide you in choosing the right kind of advisor.
All that said, regardless of what type of advisor scenario you may choose, below are some reasons you might consider using one…
What are the Benefits of a Financial Advisor for Hire?
Jumping right in, here are some reasons why I (Joe DiSanto) think you might want to hire a financial advisor.
- You know nothing about investing except that you need to do it.
- You don't want to spend the time needed to tend to your investments.
- You want a third party opinion to be more objective about your investment choices.
- You want to both get help, and to learn as well.
- You know you are emotional about money, and want to avoid making very bad choices in challenging times.
So let's take a deeper look at these reasons…
You Want to Plan for Your Financial Future, but Don't Know How
Everybody starts somewhere. And at first, the road can seem blurry. So many goals and such limited resources: student loss, retirement accounts, emergency funds, house purchases, vacations, marriage, fun times, etc.
Money can be overwhelming, especially if you are the type of person that just doesn't like to deal with money all that much (of which there are many).
If you have a comfortable rainy day fund and can afford to start investing money in the markets, a financial advisor could help. They might even pay for themselves in a short timespan, if they help you make better investment decisions.
You Don't Have the Time
Some people hate dealing with money…and that is a reason you might seek some help. But other people just don't have the time. With your career and family to tend to, that often doesn't leave much time to learn about the vast world of investing.
Investment learning takes time, and it requires a particular level of interest to get a sold understanding developed. There's a lot that goes into creating a successful investor.
If lack of time is an issue for you, then an advisor option can help solve that problem.
You Want (or Need) a Third-Party Opinion
For the people that know a thing or two about investing, it's certainly easy enough to do it in your own these days. So why, if you can do it, would you pay for an advisor and reduce your returns?
Well, I guess I would say that no matter how much you think you know, there is always someone out there who knows more. And that could be a good advisor.
Actually, more truthfully, it would be the team of people in the strategy department, who actually craft the firms investment strategies. Often the FA is more of a client liaison, and someone you can call and cry to during market downturns.
The investment strategy team also feeds the Robo-Advisor's algorithm, so it knows what to do and when.
So here's the bottom line. If hiring a financial advisor (and their team) saves you from bad investments or makes you more money with opportunities that you would have overlooked…then they potentially could earn back their own fees.
You Want to Learn More About Investing
A financial advisor is not just a tool to help you make investment decisions. They often are willing to be both a teacher and (more reluctantly) a therapist of sorts.
Now they are not going to come to your house with a white board, and help you get your Series 7 license, but if you want to learn more about investing, hiring an advisor can be beneficial.
Not only can they help you improve your financial situation, but you can definitely mine them for a lot of information over time. And by doing so, further advance you within the world of finance.
You Want to Avoid Making VERY BAD MOVES in the Volatile Times.
This is probably the most important reason of all! A financial advisor can stop you from being your own worst enemy.
I don't care how “Iceman” you think you are, statistically speaking, emotions override investment decisions. It can be hard to be objective when you're watching your hard earned money seemingly disappear into thin air.
That's why the qualified opinion of a financial advisor can benefit you. They will provide you with well-developed analytical reasons for each decision – something that can be of value to even the most sophisticated investors.
But more importantly, they will just be there to say, “Don't even think about doing that right now! Just stay calm and stay the course.”
Personal Finance Management Done Right (Which May Mean…Not by You!)
Now that you understand the benefits of a financial advisor, you are well on your way to deciding if hiring one is right for you.
(I know, sometimes blog post writing is terrible. “Well on you r way…”! Sorry.).
But seriously, I do hope this help information helps you to understand why an advisor may be a better choice that going it alone. I am really into this stuff, and I'm pretty good with money, but even my emotions have made me make some bad choices in the markets!
And If You Are Wondering What I do…
…It's two fold. I have two retirement accounts, and this is how they are managed…
One account I manage myself and I employ a very simple asset mix called The Permanent Portfolio. It is what would be considered an all-weather portfolio.
My other account is managed by Creative Planning. This is the firm owned by the author of the book I mentioned above. I'm not necessarily recommending them, but I have used them for the last year.
In this past year, the permanent portfolio has done a bit better. But I really do like CP's holistic approach to life and retirement planning!