Plus 7 other times when you should seek professional financial guidance.
A couple weeks ago I was at the gym and as one does in between sets, started speaking with a businessman exercising next to me. He had several personal finance questions that ranged from how to pay for home improvements, to saving and investing for retirement, to creating passive income, among others. One thing became abundantly clear, he was getting most of his financial tips, guidance, and advice from people that had no clue about his full financial picture. As he put it, these were friends that were “smarter,” “more successful,” and “luckier” than he was. The biggest challenge for him was that each person had differing views on certain tactics and strategies, where to invest, and were in different stages of life, which just caused him confusion and anxiety and even stopped him from taking any action.
That’s when it hit me. Most people know they need financial guidance, but many have no idea when it’s the right time to hire a financial professional for their financial planning and investment management expertise.
A financial advisor can provide invaluable guidance not only to achieve your financial goals but also to help you grow your wealth. Yet only 35% of Americans worked with a financial advisor in 2022, according to a survey ran by Statista Research. Perhaps it’s because many people believe that only the ultra-wealthy need a financial advisor, but the truth is, everyone can benefit from one.
In many cases, it may be clear that hiring a financial advisor is the best way to ensure your finances are in order, but how do you know exactly when it’s time to seek professional help? In this blog post, we’ll explore a few scenarios that show why working with a financial advisor is worth the money and that will help you decide on when it might be the right choice for you to seek guidance.
Reason #8: You Simply Want Some Investment or Money Management Guidance
The first point to consider when determining whether you need a financial advisor is your current level of comfort with managing your finances. If you have trouble balancing your checkbook or understanding complex investments, then hiring a financial adviser may be beneficial for you.
Here’s a real, clear example of what could be many people’s situation at the time. During a recent ski trip with some friends, we got to chat about our respective careers and as soon as I mentioned that I’m a Certified Financial Planner®, a lady in our party yelped for help. She and her husband had been thinking of hiring an advisor for a while but didn’t know where to start. It didn’t come as a surprise as her unique situation is one that definitely asks for professional support: she recently completed grad school while her husband is transitioning jobs, both are making good money, they recently bought their first home and are considering having kids soon.
Overall, she felt anxious about how best handle their money wisely and thought it was time to find proper guidance. She joked about how despite years of schooling combined, none of them know the basics needed when it comes to dealing with finances – but this knowledge gap is something we financial planners come across more often than you think.
Reason #7: You’re Planning for Retirement
Achieving financial security during retirement requires more than merely having saved enough money: it requires understanding different options that come with varying levels of risk, tax implications, and periods for return. As retirement approaches, the right blend of retirement savings and sound advice from an expert can help you create a retirement plan that meets your unique needs.
A financial advisor can provide valuable insights into your current retirement investments, analyze expected income post-retirement, and advise on healthy strategies to manage your lifestyle and spending habits so you don’t blow up your retirement funds too soon. Your financial planner will also be able to guide you through important decisions concerning things such as Social Security benefits, IRA investments, Medicare and healthcare planning, estate planning and more so that you leave nothing overlooked and can enjoy some well-deserved peace of mind.
Reason #6: You Have a Lot of Debt
If you are struggling to make ends meet and find yourself growing deeper into financial stress, it might be time to seek financial advice. A financial advisor can help you develop strategies for debt management and make a personalized financial plan that works for your budget. With the right guidance and commitment, you can make practical changes in spending habits that can help to clear your financial obligations without sacrificing your financial wellbeing in the long-term. Investing some time in taking control of your financial situation today could provide big payoffs down the road.
In this situation it’s important to find an advisor that can provide the right guidance. What I mean is that many financial firms are not setup to serve this type of client because of their business model or fee structure. Finding an advisor that provides fee for planning-type service might be the best for this case.
Reason #5: You Have Multiple Income Streams and Expenses
Having multiple income streams (job, properties, side hustle, etc.) and expenses (childcare, rentals, etc.) it always gets to a point when it’s complicated to manage everything on a spreadsheet or with paper and your pocket calculator. At this stage, the financial decisions at hand get more complicated and also carry more weight.
This is when the cookie cutter solutions start to fail, as with nuances to consider such as taxes, investments, retirement funds, the size of your paycheck, and so on, what works for everyone else may not be suitable for your unique situation. A financial advisor can give you insights that your spreadsheet simply can’t offer and will ensure that you understand all of your options before making decisions. Your planner will also be able to make sense of the clutter and help you maximize the financial benefits of your various assets, find opportunities for tax savings, get the most out of investments, develop a strategy to minimize debts, provide budgeting advice, strategies to save money and more.
Recently I was onboarding a client and he shared with me that the one of the reasons he and his wife chose me was something I said. During an initial consultation I said, “it sounds like your financial situation has become too complicated to simply manage on a spreadsheet.” This hit home because he then proceeded to show me the dozen or so spreadsheets and apps he had to manage a budget, rental properties, investment accounts, and student loan payments. He was impressed by Four Points Wealth’s ability to integrate technology and personalized financial planning into easy digest reports and dashboards.
Reason #4: You’ve Recently Come into A Large Sum of Money or Inherited Assets
While most people dream of winning the lottery, you have a near zero percent chance of that happening. However, there are other instances where you could stand to receive a large sum of money. If you’ve recently come into a substantial sum or inherited assets, you may find yourself confused about what to do next. Of course, there is generic investment guidance out there, but with so many options it can be difficult to decide which one is right for your circumstances. A financial advisor with experience in wealth management can make recommendations customized to your individual needs and give you peace of mind that your recently acquired money is managed securely and sustainably.
I have a client who lost her father unexpectedly and she was left as the sole executor of his estate. While this has been an emotional experience, her father managed to leave her a significant inheritance. Once she untangled his various financial affairs (a story and lesson for another day), she wanted to ensure the money was used in a way to honor her father. Using that framework, we put together a plan that included using some of the money for an unforgettable family vacation to her dad’s favorite beach, creating a investment accounts for her children, and investing portfolio strategy to help her and her husband grow their wealth.
Reason #3: You’re Contemplating Starting a Business or Are Selling a Current One
Starting or selling a business requires detailed planning, expertise, and experience in order to make the right decisions. In these cases, a financial advisor can be a valuable asset when it comes to identifying the most effective methods for handling cash flow, investments and other strategies to ensure long-term financial stability. They are also great resources for evaluating the process of selling a business so you can ensure the money is used wisely and doesn’t evaporate too quickly. Making use of an advisor’s expertise can allow you to focus on growing your business rather than worrying about how its finances are managed.
Warning: Personal Story – When I was preparing to launch Four Points Wealth Management I took the time, effort, and diligence to plan for my departure from my former firm. Often, when you start a company, you don’t get many “do overs” so you have to be prepared for unplanned events. One of the biggest concerns I had was being able to bridge the income gap between leaving my old firm and creating income from my new company. I was fortunate because my wife makes good money, so I knew I had a reasonably safety net. Although we could lean on our savings, I ended up taking a HELOC out if the worst situation arose and things got tight. Fortunately, we didn’t need to use it but it was nice to know it was there. The last thing I’ll add is to stress test your situation, as in ask the question “what’s the bare minimum that will make this venture work?” For me I felt extremely confident that I could achieve the bare minimum.
If you’re selling a company, there are a host of issues you’ll want to consider. Things like taxes, what to do next, and how it may impact your emotional wellbeing, among many other considerations. A good financial advisor will help you through all these issues. Just like starting a business, you should take the time to evaluate your exit strategy. This should not be some willy-nilly transaction, as it’s likely you put your heart and soul into making it successful.
Starting a company can seem like a lonely venture, and having a trusted financial professional help you through these details can be the difference between success and failure.
Reason #2: You’re Preparing for a Significant Life Event
Preparing for a significant life event like getting married (or divorced) or having children can be both exciting and nerve-wracking because these decisions will have financial implications that need to be managed carefully.
Before you tie the knot, for example, it’s essential to consider all aspects of how your finances will be combined going forward. This goes beyond just discussing how much you both earn and how much you can budget for bills, but also understanding any financial goals that you may wish to pursue as a couple. It’s also important to look inward at each partner’s attitude toward money, whether it was shaped by their upbringing or even passed down from generations before. Like a friend of mine, who recently found himself in a more serious relationship with his girlfriend and has been grappling with these questions of balancing their different incomes, lifestyles, and money behaviors for the path ahead. Regardless of what your financial standing is like as a couple, having an open conversation about finances is key for starting off on the right foot.
On the other hand, is divorce, which is already a challenging process even if it’s amicable. It’s a good idea to talk with a financial advisor who can help you understand the many complexities that may arise – not just during the divorce itself, but after. Even if you feel like you don’t have that many assets and money to fight for, it never hurts to talk to an expert about your finances and available benefits. For example, I had a cousin who passed away young, leaving behind two kids and a wife. His widow was able to file for social security benefits on behalf of her children until they were 18 years old; something that she may never have known how to do without the help of an experienced financial advisor.
Now, adding a child to your family is a big decision and requires careful financial planning. After all, children are a hefty expense. A financial advisor can help you make the most of your resources, understand different tax rules, craft a budget based on your exact circumstances and prioritize investments to meet long-term goals like saving for college, for example, and more. They also have an eye for both opportunities and risk factors that must be considered when planning and investing toward providing the best care possible for your child.
The Number #1 Reason to Hire a Financial Advisor: You get most of your advice from friends or the internet
It can be tempting to seek financial advice from friends or the internet. After all, we all want to make informed decisions about our money and investments. However, there are several reasons why it’s not wise to rely solely on these sources for financial advice.
Firstly, friends may not have the necessary knowledge or expertise to provide sound financial advice that aligns with your circumstance. While they may have good intentions and want to help, they may not be well-versed in the complexities of financial planning and investing. What worked for them may not work for you, and their advice may be based on personal biases or experiences that are not relevant to your unique situation.
This couldn’t be more highlighted by a recent theme I’ve been seeing over the past couple years. Nearly every younger client (35-45 years old) tells me they want to have a portfolio of rental properties. When I ask a little further, they tell me that their friend (or friend of a friend) has made gobs of money in real estate. While there’s no doubt real estate can be a great investment vehicle there are certain aspects that may not be very attractive upon further inspection i.e. bad tenants, a broken water pipe, a bad property management company, and the list goes on. To be clear, I’m not against real estate, I don’t believe it’s the end-all, be-all investment strategy.
Similarly, the internet is filled with a wealth of information, but not all of it is trustworthy or accurate. There are countless financial blogs, forums, and social media pages where people share their opinions and experiences. Remember during COVID lockdowns when your social media feed was filled with your friends and influencers spouting off about the fool proof investments in Meme Stocks and Crypto? However, it can be difficult to differentiate between reliable and unreliable sources. Many of these sources may not be qualified to offer financial advice, and some may have ulterior motives, such as promoting specific products or services.
Secondly, financial advice should be tailored to your specific needs and goals. Everyone’s financial situation is different, and what works for one person may not work for another. A financial advisor can take the time to understand your unique circumstances and provide personalized advice that is designed to help you achieve your specific financial goals. While the internet can provide great free tools and calculators, much of that information is hard to decipher or apply it to your individual circumstances.
Additionally, there are countless factors that can impact your financial planning, such as your age, income, risk tolerance, and investment goals. Financial advisors are trained to consider all of these factors and create a customized plan that is designed to help you achieve your specific financial goals. Advice from friends or the internet may not take all of these factors into account.
Lastly, many financial advisors, like Four Points Wealth Management, are bound by a fiduciary duty to act in their clients’ best interests. This means that they are legally obligated to provide advice that is in their clients’ best interests, rather than their own. Friends and the internet do not have this same legal obligation.
In the end, while it may be tempting to seek financial advice from friends or the internet, it’s important to be cautious and consider the potential pitfalls. Friends may not have the necessary expertise or may be biased by their own experiences, while the internet is filled with unreliable sources. Financial advice should be tailored to your specific needs and goals and should take into account all of the relevant factors. Ultimately, seeking the guidance of a qualified financial advisor who is bound by a fiduciary duty to act in your best interests is the best way to ensure that you receive sound financial advice that is tailored to your unique circumstances.
Tell Me More, What Does a Financial Advisor Do?
If you’re ready to take control of your finances and make the most of your money, you should consider hiring a financial advisor. Here are a few reasons why working with a financial advisor is a smart move:
- They provide direction and clarity.
- They can identify opportunities that you wouldn’t have noticed on your own.
- They help you develop self-discipline and persistence.
- They’ll help make the most out of your investments while managing the associated risks.
- They can help ease any anxiety related to making important decisions about your finances.
- They are a helping hand in times of already-complex life changes.
- They help you avoid costly missteps.
If you’re considering seeking guidance from an experienced Certified Financial Planner®, contact me at Four Points Wealth Management. Together we can take the first step towards building a brighter tomorrow for yourself and/or your family.
Advisory services are offered through CS Planning, Corp., an SEC registered investment adviser
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