Breaking Down the Money Barrier: When To Consider a Financial Advisor

Stop spinning your financial wheels! Find out when to bring in the big guns and hire a financial advisor to level up your money game.

The Definition: A financial advisor is a professional who provides expertise for clients’ decisions around money matters, personal finances, and investments.

When Do You Need a Financial Advisor?

How Do You Know if You Need One?

Michelle Francis, a Financial Planner with  Life Story Financial, says big life events are a good time to get a financial advisor, “It’s helpful to talk to a financial planner when experiencing a big life change, like getting married, having children, starting a new job or career or wanting to retire.”

She also says a planner can help you if you are stuck or overwhelmed, “It might be time to get some help if you’re feeling stuck about taking action in your financial life. Some less obvious examples include not being on the same page with a spouse about your finances; avoiding making an important financial decision, becoming overwhelmed about the different options; or not fully understanding an employer’s benefits package and what’s being offered for retirement savings, stock compensation or insurance coverage. ”

Low-Income Folks

What if you have a low income? Can you still use a financial planner, and should you?

Larson Patty, a Financial Planner from Rothman Investment Management, says when you are just starting out and have a low-income a financial planner or advisor can still be beneficial,

“Individuals just starting out typically have a low (or even negative) net worth, but a long time horizon to employ their human capital. The sooner young people start working with a financial advisor, the better. Costly long-term mistakes can be avoided early. Getting clarity around your goals early in life will give direction and purpose to your deferred consumption. Getting into a habit of investing early in your career helps establish a separation between your lifestyle and income. Starting early in life with a financial plan generally allows for less contributed capital to meet the same goals due to the miracle of compound interest over more compounding periods.”

What if They Can’t Afford a Financial Planner?

Patty advises low-income folks to look into different compensation structures to find the best system for them,  “There are a variety of ways financial advisors can be compensated. Many advisors have AUM (Assets Under Management) minimums that are difficult for some individuals to meet. Individuals with a low income or low net worth should consider working with an advisor charging a reasonable flat fee for financial planning services. Subscription coaching models may be more affordable as well. For those with a willingness to self-educate – read!”

Times Have Changed

David E. Barfield, CFP at Datapoint Financial Planning, LLC, says that traditionally financial planners were geared toward higher-income individuals, but like most things, times have changed.

He explains, “Almost anyone can benefit from good financial advice; however, traditionally, advisors have mostly served higher net worth clients with enough investable assets to pay the fees directly from the portfolio in the form of a percentage of the assets managed.  This “percentage of assets” or AUM fee model has meant that many did not seek the help of an advisor until nearing retirement when they had enough assets to meet the AUM advisors’ minimums.”

But Millenials are changing the game, “Millennials are slowly changing that paradigm as they demand financial planning advice at earlier life stages than prior generations.  And with that demand, Millennials are placing a higher value on the financial planning than they are on investment management.  Fortunately, many advisors are adjusting to meet that demand with flat-fee and subscription-based models that focus on all areas of personal finance rather than just investment management.  Avoiding big financial mistakes early on in one’s life can often have the biggest impact on long-term success.  So, the earlier, the better.  I serve many clients in their twenties,” says Barfield.

Ask the Right Questions

When hiring a financial advisor, it’s important to ask the right questions.

Jonathon Bird, CFP Farnam Financial, suggests asking the following questions:

  • How do you typically work with clients?
  • What types of clients do you specialize in?
  • What is your investment philosophy?
  • How do you tailor your services to meet individual needs?
  • How do you measure success in financial planning?

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This article was produced and syndicated by A Dime Saved.

Hi! I am a millennial mom with a passion for personal finance. I have always been “into” personal finance but got inspired to start my blog after a period of extended unemployment. That experience really changed the way I viewed my relationship with money and the importance of accessible personal finance education.