Is A Financial Advisor Worth It?

Have you considered hiring a financial advisor? Investing in the future can be made easier with the help of professional advisors. They will help you make wise decisions about your money and better prepare you for the future. Financial advisors, on the other hand, are not free. Therefore, you need to think over if your situation would be improved by working with an advisor and whether it would be worth it for you to do so. We are about to look at what financial advisors do, what they may charge, and when they are worth the money they charge.

What Does a Financial Advisor Do?

Financial advisors are professionals who help you manage your money and build strategies to invest and develop your wealth over the long way. A financial advisor can assist you with all aspects of your economic life, including but not limited to the following:

  • Saving for retirement
  • Investing
  • Tax mitigation
  • Estate planning
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How Much Does it Cost to Hire a Financial Advisor?

Some financial advisors charge a flat fee (hourly or yearly), while others charge a percentage. Although the rates for a financial advisor will change, generally, there is an average fee between .25 and 1% of the number of assets under management (AUM). This is a short term used to describe how much money the advisor manages on your behalf.

For example, let’s suppose you’ve saved $1 million in your nest egg and would like to invest it with the help of a financial advisor. Suppose their fee is 1% of your AUM, then if they plan to act on your behalf, they would charge you $10,000 per year.

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When is a Financial Advisor Worth the Expense?

Talking to a professional in some situations can be an excellent idea; in some cases, it would be preferable. The credentials and expertise of an advisor are always imperative to look at to ensure they align with your goals to ensure a successful outcome. Let’s take a look at some situations in which you may get benefit from the help of a financial advisor:

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When you don’t understand your finances or don’t enjoy managing them

Some people do not like managing their finances. It is a full-time skill that requires a lot of education, time, and effort to develop, and that is an ongoing process. It is sometimes worth it to let a financial advisor handle a task you do not enjoy, other than the other benefits.

If you have a disorganized financial situation

There have been four jobs that you have had over the past ten years, and you have retirement accounts with five different financial institutions. It is challenging to track your monthly spending because you have three credit cards and two checking accounts. If you find yourself in this situation, it can be challenging to determine where you stand in terms of your finances. It is very critical to find the right financial advisor who will be able to help you get on track and develop a strategy in the future. If you work with one of right financial advisors, they may be worth it to help you consolidate your retirement accounts and put together a budget and strategy for the future.

Sometimes, you need guidance on a big decision or to deal with a life event

Do you plan on having your first child soon? Do you have the plan to retire to another state? Are you thinking about moving there? In this situation, you may be in a position where a professional can help you in assessing the decision and what is at stake financially in making the decision. Could this also have an impact on other areas of your life? An advisor can tell you what questions to ask, where to look for answers, and what step to take next based on the answers.

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There are many situations where a financial advisor is worth it. However, there are plenty of cases where you cannot afford to hire a financial adviser. This is, for example, if you are a college junior who isn’t previously working at your first job, etc. It is never a bad idea to speak with a professional, if you’ve had any of these scenarios explained above. Or, you just want to see what a financial roadmap will look like for you.

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Images by Mohamed Hassan and Robert Owen-Wahl