Do You Need a Financial Advisor?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 15, 2024

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Financial Advisor Overview

Financial advisors are professionals who help clients manage their money. They provide advice and services related to finance and investments.

Their services may address specific and immediate financial problems such as investment management, stock purchase or sale, or the creation of an estate and tax plan. It may include financial planning, asset allocation, insurance, and retirement.

Not all financial advisors are fiduciary as some only abide by the suitability standard. Fiduciary financial advisors prioritize clients' interests while making investment choices for them.

Securities and Exchange Commission (SEC) registration is optional for financial advisors up to a certain threshold of assets under management.

When Do You Need a Financial Advisor?

There are crucial circumstances when you may need the services of a financial advisor. You may benefit from their guidance when:

You Lack Time or Expertise

A financial advisor can be your go-to source if you need more time or knowledge to make informed financial decisions. Having someone who understands you and can provide professional advice on difficult financial choices is essential.

Your Financial Situation Is Too Complex

Financial advisors can offer valuable insights and advice if your financial situation is too complex to manage independently. They provide feedback on complicated scenarios, understand how each part of your finances affects the other, and deliver comprehensive help.

You Need Help in Creating an Investment Strategy

It is essential to have someone who understands you and can provide professional advice and innovative financial strategies. They can create a customized investment strategy based on your income, objectives, risk tolerance, and other conditions that fit your needs.

You Need Tax Guidance

Financial advisors are experienced in the complexities of various tax services and regulations and can help you maximize your deductions and credits. They also keep up with the latest tax code changes and know the most efficient tax filing strategies.

You Are Too Emotional When It Comes to Investment Decisions

Investing can be emotionally stressful. A financial advisor can help you make decisions based on facts rather than emotions. They will look at the big picture of your finances and provide objective advice in your best interest.

You Are Nearing Retirement

Retirement can be tricky for finances as you transition from earning money to spending it. A financial advisor can help create an income plan for retirement. They allow you to decide how best to access your retirement savings without hefty taxes or penalties.

Pros of Hiring a Financial Advisor

Having a financial advisor provides a qualified and objective investing guide. There are several benefits to hiring one:

Offers Expert Advice

Financial advisors are experienced professionals who understand the complexities of financial decisions. They can provide expert, personalized advice and reliable approaches considering your goals and risk tolerance.

Saves You Time

The changing financial landscape can be overwhelming and time-consuming. Working with a financial advisor makes managing all aspects of your finances more bearable, freeing up time for other activities or tasks in life.

Keeps You From Making Expensive & Emotional Financial Decisions

It is common for people to become too involved or frustrated when managing finances. Financial advisors provide an unbiased perspective and advise you against making rash decisions.

Cons of Hiring a Financial Advisor

While there are potential benefits to hiring a financial advisor, there are also certain drawbacks to consider before making a decision:

May Involve Conflict of Interest

A conflict of interest may emerge if the advisor earns money from the products they are recommending and obtains commissions from selling them. Consider advisors who are fee-only, meaning they do not receive commissions from the investments or products they advise you on.

Has Cost & Fees

Financial advisors often come with hefty price tags or commissions that must be factored into your budget if you wish to work with them. You may have to pay for the advice upfront or through mutual fund fees and other charges.

Offers Limited Knowledge

Financial advisors are knowledgeable in the areas they specialize in but may only be experts in some aspects of your financial needs. You may need more than one advisor for all your financial needs, which can be an added burden.


Working With a Financial Advisor

Initially, you will be required to provide them with financial details related to the services you seek.

Submitting tax records, outlining your plans, and describing the size and contents of your investment accounts, among other things, may be required.

Usually, advisors ask you to answer a questionnaire to understand your financial situation better and tailor their services to meet your specific needs.

Essential details include your retirement schedule, income, risk tolerance, preferences, goals, and other necessary financial information.

Once the financial advisor has a comprehensive understanding of your needs, they can begin working on any services that you have requested to achieve your goals.

Depending on the agreement, they may provide investment advice, asset management services, retirement planning, estate planning, or other services.

Financial advisors can also help you stay on top of any changes in the financial markets that could impact your portfolio.

The cost of financial advisors is usually in the form of a fixed fee, a percentage of your assets under management, hourly fees, or based on commissions.

The agreement between you and the financial advisor should clearly outline their services, fees, and other pertinent details. Be sure to ask a financial advisor relevant questions and read through the contract carefully before committing to it.

How to Find a Financial Advisor

Finding a financial advisor has always been challenging; you can search for financial advisors online, look them up in an available database, get advice from your friends and family or even quickly run a search engine query.

A simple search will present you with a list of prospective advisors. It is crucial to ask questions about their policies, values, and procedures, which will assist you in selecting the best option.

Work with a financial advisor who adheres to the fiduciary standard to safeguard your best interests. Determine the services you require and match them to the type of adviser and services offered by that advisor.

Verify your advisor's credentials and experience. Take the time to interview many advisors and select the one that satisfies your standards. Your advisor should be someone you are comfortable collaborating with and who fully comprehends your goals.

The Bottom Line

Working with a financial advisor will depend on your individual needs. Consider hiring one when you need more time or expertise to manage your finances, if your situation is too complex, and you are nearing retirement.

You may benefit from a financial advisor if you need help with your taxes, investment strategy guidance, and more time to make these decisions.

Make sure to weigh the pros and cons before hiring one. You can get expert advice, save time, and avoid making expensive mistakes. However, you must be cautious of potential conflicts of interest, costly fees, and lack of expertise.

Financial advisors can be found online or by recommendations if you decide to work with one. Find a fiduciary, know their services, costs, and fees, and decide if this is the right fit for you.

Do You Need a Financial Advisor? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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