Shutterstock PotstockAlmost no one wakes up one day and declares, “I can’t wait to hire a financial adviser.”
After all, if you contribute a significant portion of your salary to your company’s 401(k) plan, and any additional money you invest on your own appears to be producing positive results, you probably feel in command of your financial domain.
When life becomes more complicated and finances resemble a multi-layered onion rather than a pancake, most people feel the need to seek professional help.
People pay for financial advice to gain peace of mind and sleep better at night knowing that they are making the best financial decisions possible.
People seek advice because they are uncertain.This is frequently linked to recent or upcoming career changes or significant life events.Here are a few examples of commonly used examples.
- A working couple in their forties with children is trying to save enough money to pay for their children’s six-figure college costs while also retiring comfortably.
- A couple in their early 60s is concerned about whether their investments and Social Security will provide enough income for them to live comfortably in retirement, which could last up to 25 years.They realize they can’t afford any major mistakes.
- Losses incurred as a result of panic-selling in declining markets have shaken self-directed investors’ faith in their own stock-trading abilities, and they want to avoid making the same mistakes again.
- Employees at pre-IPO startups who want to cash in their stock options without paying a large tax penalty.
- Parents of special-needs children who want to plan for and protect their children after they die, and who have a third retirement to save for
- Anyone concerned about tax policy changes and wishing to avoid Uncle Sam and their state taking a significant portion of the wealth they intend to leave to their heirs.
People hire advisers when they want to learn more about financial planning and investing.Frequently, one spouse has no interest in family financial matters until they are forced to participate in decision-making.
In short, people hire financial advisers when they realize that their goal isn’t just to beat the market, but to gain greater confidence in their ability to build wealth, reduce taxes, and provide long-term financial security for themselves and their families.
Selecting and locating the right type of advisor
The term “financial adviser” refers to a wide range of financial professionals.However, not all advisers are the same, and understanding the differences is crucial.
Some are essentially investment salespeople, also known as brokers, who make their living off commissions from mutual fund and insurance sales.The advice you get from a broker or an insurance agent isn’t always unbiased or in your best financial interests.
Many people understand that sales pitches and advice should be kept separate.That is why they seek the services of a thoroughly vetted fee-only advisor who is legally bound by the fiduciary standard.
Unlike brokers, fee-only advisers are compensated solely by their clients.Their fees vary, but they rarely exceed 1% of your assets’ value and can be paid on a retainer basis.
Although this may appear to be a significant sum, adviser fees frequently pay for themselves when the adviser’s advice or actions prevent their clients from making costly mistakes that could jeopardize their financial security in the future.
Consider an employee who has stock options worth millions of dollars.By selling the options gradually rather than all at once, an adviser can help them avoid a seven-figure tax bill.
Consider a couple who has either purchased or inherited income-producing rental properties.The adviser can help them incorporate these hard assets into their overall investment strategy and suggest strategies to protect them from paying taxes on rental income or capital gains taxes (such as putting these properties in a trust).
Whether recommended by a friend or family member or discovered on your own, it’s critical to thoroughly investigate any adviser’s credentials and disciplinary history.
Wealthramp is a directory of fee-only financial advisors who follow the highest ethical standards.is an online adviser referral service that I founded to connect people with carefully vetted investment and financial planning professionals who best suit their needs.
A collaboration that produces results
People who have handled their own personal finances and investments may believe that hiring a fee-only adviser to handle some or all of these activities is admitting that they are in debt.
However, in reality, the opposite is true.Working with a qualified financial adviser professional, on the other hand, benefits financial do-it-yourselfers the most because they know the right questions to ask, fully understand the benefits and drawbacks of any advice or solutions an adviser offers, and have the knowledge to evaluate the results.
The best financial advisers prefer fully engaged clients because these types of collaborative relationships almost always produce the best results for everyone.At the end of the day, this is what provides true peace of mind.
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