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  • Writer's pictureTroné Fossum

Do I Need a Financial Advisor?

Updated: 7 days ago


Do I Need a Financial Advisor?

"Do I need a financial advisor?"


If you're wondering whether you need a financial advisor, you probably do. 


However, the value a person gets from working with a financial advisor varies. The greater your investable assets and income, the more value you typically get when working with a financial advisor or wealth management team.  


If your nest egg is under $250,000, you may be happy to continue investing on your own. There's nothing wrong with that. However, once your investable assets have grown beyond $1M, finding the right financial advisor may be worthwhile. Unless you're passionate about personal finance and investing, your energy will likely be better directed towards stewarding your career and increasing your earning potential.


In addition, the greater your nest egg, the more you have to lose.


Remember that time is one thing we can't get back. Over time, your investments take advantage of the power of compound interest. Having a financial advisor is wise because part of their job is to ensure you're heading in the right direction with the correct level of risk. 

Working with a financial advisor may be wise for someone too busy to create a diversified investment portfolio on their own.


A fiduciary financial advisor is legally bound to act in your best interest and seek to ensure that you have a customized financial plan and investment portfolio. They'll also work with you to ensure your estate planning and tax planning are covered.


Let’s say that you’re a business owner with a young family. 

You work 10 hours per day. Sometimes more. And you value spending time with your family during your free time.  You’re probably too busy to create a diversified portfolio, rebalance your investments annually, do your estate planning, make sure you’re not overpaying your taxes, and create a financial plan that reflects your financial goals. 


You want to have a plan, and you want everything to be done right. But it can be hard to let go of the reigns.  If this sounds like you, you’re probably a good candidate for a financial advisor.


Finally, taxes are often your biggest expense when you're a high-income earner.


A wealth management team with tax specialists, financial planners, and financial advisors may help you minimize your tax burden and create an investment portfolio tailored to your risk tolerance and goals. They'll help guide your financial life.


When you're being guided by a team of experienced financial professionals who wish to see your greatest success, you're likely to feel more confident in your numbers as you head toward retirement.



Table of Contents




But, What Do Financial Advisors Do?


Financial advisors help their clients move toward their financial goals through comprehensive financial planning and investment management.


A fiduciary financial advisor will offer customized advice based on your needs, life circumstances, risk tolerance, and goals. They will help you manage risk while moving toward your desired financial future.


Additionally, advisors help with tax, retirement, and estate planning, seeking to ensure clients' wealth is preserved and transferred according to their wishes.



Fiduciary Financial Advisors vs Regular Advisors


Fiduciary financial advisors are held to the highest ethical standards, ensuring they always act in the best interests of their clients providing transparent advice.


This fiduciary duty is crucial for maintaining trust and integrity in the advisor-client relationship. Not all financial advisors are fiduciaries; some may follow different standards, so clients should verify an advisor's fiduciary status before signing.



financial advisors chatting with clients


When to Get a Financial Advisor


Are you going through a major life event?


Hiring a financial advisor is particularly beneficial during major life events such as marriage, divorce, getting an inheritance, or starting a business.


These situations can significantly impact your financial landscape.


A financial advisor can provide guidance and support if you lack the time to manage your investments effectively. Additionally, if you feel overwhelmed or uncertain about your financial decisions, a financial advisor can help create a clear and actionable plan to pursue your financial goals.


Is your financial situation complex?


Complex financial situations like having multiple income streams, significant assets, or owning a business may require specialized knowledge and strategic planning.


A financial advisor can provide professional guidance on managing these complexities, ensuring tax efficiency, proper asset allocation, and risk management. Professional advice can help you navigate intricate financial landscapes, optimize your investments, and safeguard against potential pitfalls.


Are you moving towards financial freedom or other goals?


Clear financial goals, such as retirement or funding education, greatly benefit from a structured and strategic plan provided by a financial advisor.


Conversely, if your financial goals are undefined or constantly changing, an advisor can help clarify and prioritize these objectives, creating a tailored roadmap to work towards them.


Professional guidance ensures that your financial strategies align with your long-term aspirations, providing clarity and direction.



When to Get a Financial Advisor


12 Signs You Might Need a Financial Advisor


1. You just got married.


Marriage often brings the need to merge finances, set joint financial goals, and plan for the future together. This may be easier with the guidance of a financial professional.


2. You just inherited a large sum.


Inheriting a significant amount of money can be overwhelming, and a financial advisor can help you manage it wisely and plan for long-term growth. Finding an advisor with experience helping clients with sudden wealth may be wise.


3. You're starting a business.


Starting a business involves complex financial planning, including budgeting, tax planning, and investment strategies that a financial advisor can assist with. Find a business financial advisor who has experience with clients like yourself.


4. You're selling a business.


Selling a business requires careful financial planning to maximize the proceeds and manage the tax implications.


5. You're so busy at work that you don't have time to rebalance your portfolio yearly.


A financial advisor can seek to ensure your investment portfolio remains aligned with your goals and risk tolerance, even when you're too busy to manage it yourself.


6. Your financial situation has become more complex due to multiple income streams or properties.


Managing multiple income streams and properties requires advanced financial strategies and tax planning that a financial advisor can provide.


7. You're not passionate about financial planning and investing.


If financial planning and investing don't interest you, a financial advisor can take the burden off your shoulders and seek to ensure your finances are well-managed.


8. You're five to ten years away from retirement, but unsure if you're on track.


A financial advisor can help you assess your retirement readiness and create a plan that aims to ensure you are on track toward your retirement goals.


9. You're not confident in your numbers.


A financial advisor can provide clarity and accuracy if you're uncertain about your financial calculations and projections.


10. Making big financial decisions stresses you out even though you're a high-income earner with a large 401(k).


A financial advisor can offer professional guidance and alleviate the stress associated with major financial decisions.


11. You tend to be impulsive or to act emotionally.


A financial advisor can provide customized advice and help you avoid impulsive or emotionally driven financial decisions.


12. You're worried you may be overpaying your taxes.


A financial advisor can review your tax situation and implement strategies to minimize tax liability.




What a financial advisor does.



3 Benefits of Hiring a Fiduciary Financial Advisor


Personalized Advice


Fiduciary financial advisors offer tailored advice that aligns with your unique financial goals and circumstances.


They take the time to understand your specific needs, risk tolerance, and long-term aspirations, seeking to ensure that the advice and strategies they provide are customized towards helping you achieve your objectives.


Long-Term Planning


Strategic long-term planning is crucial when planning for retirement, and fiduciary financial advisors excel in this area.


They help you set realistic goals and develop a comprehensive plan that includes retirement planning, tax strategies, and estate planning, among others.


Focusing on long-term success, they seek to ensure that your financial plan evolves with your life changes and market conditions. They aim to keep you on track towards your financial goals.


Peace of Mind and Confidence


Having a professional handle your financial planning and investment management can significantly reduce stress and provide reassurance.


Knowing that a fiduciary advisor manages your investments with your best interests in mind allows you to focus on other important aspects of your life. This professional oversight may alleviate anxiety about financial decisions and give you confidence.



Questions to Ask a Financial Advisor Before You Sign


Interview Questions to Ask a Financial Advisor:


1 - What is your approach to financial planning and investment management?

Understanding an advisor's methodology can help you determine if their approach aligns with your financial goals and risk tolerance.


2 - What specific services do you offer?

Inquire about the range of services provided to ensure they can meet all your financial needs, from investment management to tax planning and estate planning.


3 - How do you manage risk for your clients?

Ask how they manage risk and make decisions that are in the best interest of their clients.


4 - Are you a fiduciary, and how do you ensure you act in my best interests?

Confirm their fiduciary status and understand their practices to prioritize your financial well-being.


5 - What is your fee structure?

Clarify how they charge for their services, whether a flat fee, hourly rate, or percentage of assets under management, and ensure there are no hidden costs.


6 - Can you provide references or client testimonials?

Request references or testimonials to gauge the experiences of other clients and assess their satisfaction with the advisor's services.


7 - How often will we meet to review my financial plan?

Understand the frequency of reviews and updates to ensure your financial plan aligns with your evolving goals and circumstances.


8 - What qualifications and designations do you hold?

Verify their professional qualifications and designations to ensure they have the necessary expertise and credentials.


9 - How do you stay current with changes in the financial industry?

Ask about their continuing education and professional development.


10 - What is your investment philosophy?

Learn about their investment principles and strategies to determine if they match your preferences and risk tolerance.



quote card: financial advisors focusing on a target


How Will Your Financial Advisors Get Paid?


Understanding how your advisor gets paid is crucial when assessing potential conflicts of interest and ensuring transparency in your financial relationship.


Knowing the fee structure helps you evaluate the fairness and alignment of their incentives with your financial goals.


One-Time Fee


A one-time fee is a flat rate for a specific service, such as creating a comprehensive financial plan or providing a detailed investment strategy. This fee structure is transparent and straightforward, making it easy to understand the cost upfront without ongoing payments.


Annual Fee Based on Assets Under Management


An annual fee based on assets under management (AUM) is a percentage of the total assets the advisor manages on your behalf, typically ranging from 0.5% to 2% per year. This fee structure aligns the advisor's incentives with your financial growth, as their compensation increases with the value of your assets.


Commissions


Commissions are payments the advisor receives when you buy or sell investment products through them, such as mutual funds, insurance policies, or annuities. This fee structure can sometimes lead to conflicts of interest, as advisors might be incentivized to recommend products that generate higher commissions.


Hourly, Subscription, or Retainer


An hourly fee involves paying the advisor for the time spent working on your financial matters, providing flexibility for specific needs. Subscription or retainer fees are regular payments, often monthly or quarterly, that cover ongoing access to the advisor's services, ensuring continuous support and guidance.


Comparing Value vs. Cost


When evaluating the cost of a financial advisor, consider the value they bring to your financial planning and investment management.


A good fiduciary advisor can offer significant benefits, such as personalized advice, strategic long-term planning, and confidence, which can outweigh the cost of working with them.


By enhancing your financial strategy, seeking to optimize your investments, and helping you avoid costly mistakes, an advisor's services may lead to better outcomes over time.


Assessing Potential Benefits and Savings


To determine if the cost of hiring an advisor is justified, consider the potential benefits they provide.


Advisors can seek to optimize your investment portfolio, minimize tax liabilities, and create effective retirement and estate plans.


Additionally, their expertise can prevent financial missteps and ensure you make informed decisions, potentially saving you money and enhancing your financial security. Weigh these potential savings and improvements against the costs to gauge the overall value an advisor offers.



how will your financial advisor get paid?


Financial Planners vs. Financial Advisors


A financial planner will primarily focus on creating comprehensive financial plans for their clients.


They will address budgeting, saving, retirement planning, and risk management. Financial advisors may also offer planning services. However, financial advisors will also provide investment management and specific advice on asset allocation.


Both roles are essential, but financial planners tend to concentrate on long-term financial health, whereas financial advisors might focus more on seeking to maximize investment returns and managing wealth.


When you work with a holistic wealth management team, you'll have the benefit of a financial planner and financial advisor, as well as guidance with your estate planning and tax planning.



Certified Financial Planners


A Certified Financial Planner (CFP) is a professional who has met the rigorous standards set by the CFP Board.


CFPs are trained to provide comprehensive financial planning services, covering retirement, investment, tax, and estate planning areas, ensuring a holistic approach to managing personal finances.


Choosing a CFP can be a good option as they are held to high fiduciary standards, meaning they are committed to acting in their clients' best interests offering reliable and well-rounded financial advice.


However, a CFP isn't necessarily an investment management professional; while they can help you create a comprehensive financial plan, they may not execute the plan for you unless they are also licensed as an investment advisor.




financial advisor designations


How to Choose the Right Financial Advisor


Credentials and Experience


When choosing a financial advisor, look for key qualifications such as Certified Financial Planner (CFP), Accredited Investment Fiduciary (AIF), and Chartered Financial Analyst (CFA), which indicate a high level of education, training, and ethical standards. Additionally, consider their experience in areas relevant to your needs, such as retirement planning, business financial planning, estate planning, and investment management.


Reputation and Reviews


Researching an advisor’s reputation is crucial for assessing their reliability and professionalism.


Checking with regulatory bodies or industry organizations can provide insights into disciplinary actions or complaints, ensuring you choose a reputable and trustworthy advisor. And reading an advisor's Google reviews may provide insights into the satisfaction of their clients.


Compatibility and Trust


Trust is essential for a successful advisor-client relationship.


Ensure that the advisor’s communication style, values, and approach to investing align with your preferences and comfort level. Building a trusting relationship with your advisor enhances collaboration, ensuring they understand your goals. You'll want to ensure you feel comfortable sharing all aspects of your financial life with your financial advisor.



Robo-Advisors vs. Human Advisors


Robo-advisors use automated algorithms to manage and optimize your investment portfolio based on your risk tolerance, financial goals, and investment preferences.


They offer a low-cost, efficient solution for managing investments, often with lower fees than traditional human advisors. However, robo-advisors may lack the personalized, comprehensive financial planning services and nuanced understanding of complex financial situations that human advisors provide.


Traditional fiduciary financial advisors offer personalized financial planning and investment management tailored to your unique financial situation and goals. They can provide holistic advice, including retirement, tax, and estate planning, and can adapt their strategies to changes in your life circumstances.


While traditional fiduciary advisors typically charge more than robo-advisors, their ability to be your guide and provide customized strategies can offer significant value, especially for those with complex financial needs.



Wealth Management vs. Working with a Financial Advisor


Wealth Management


Wealth management is a comprehensive service tailored to high-net-worth individuals.


A wealth management firm provides a wide range of financial services, including investment management, tax planning, estate planning, and retirement planning. Wealth managers offer personalized strategies to help their clients efficiently accumulate, preserve, and transfer wealth. This service is typically more holistic and integrated, focusing on long-term wealth preservation and legacy planning.


Working with a Financial Advisor


Working with a financial advisor can benefit individuals at various income levels.


With a financial advisor, you'll receive personalized financial planning and investment advice based on your goals and circumstances.


Financial advisors help clients with budgeting, retirement planning, tax strategies, and investment management, often focusing on pursuing specific financial objectives. While financial advisors also offer comprehensive services, they may not provide the same integrated, high-touch service wealth managers offer to high-net-worth clients.



How to Choose the Right Financial Advisor


Common Questions about Getting a Financial Advisor:


Which are the best financial professionals to work with if you're a high-income earner?


High-income earners often benefit from working with fiduciary financial advisors or wealth managers specializing in comprehensive financial planning and sophisticated investment strategies.



What does a wealth manager do?


A wealth manager provides a range of financial services, including investment management, tax planning, estate planning, and retirement planning, tailored to high-net-worth clients.


Are wealth managers fiduciaries?


Many wealth managers are fiduciaries, meaning they are legally obligated to act in the best interests of their clients, but it's essential to verify their fiduciary status.


What is holistic financial planning?


Holistic financial planning considers all aspects of a person's financial life, including income, investments, taxes, insurance, and estate planning. A holistic financial plan is a comprehensive strategy that helps clients move towards achieving their long-term financial goals.


Is it really necessary to have a financial advisor?


While not necessary for everyone, a financial advisor can provide valuable expertise and guidance, which is particularly useful for those with complex financial situations or significant assets. For anyone with $1M or more in investable assets, seeking the advice of a fiduciary financial advisor may be wise.


Is it okay not to have a financial advisor?


It's okay not to have a financial advisor if you can manage your investment portfolio effectively and coordinate with your accountant, estate planning attorney, and financial planner each year. 



Summary of Key Points

  • Financial advisors may offer comprehensive financial planning, investment management, tax strategies, and estate planning tailored to individual goals and circumstances.

  • Fiduciary financial advisors are legally obligated to act in your best interests, providing transparent advice.

  • Not all financial advisors are fiduciaries.

  • Major life events, complex financial situations, lack of time or expertise, and feeling overwhelmed by financial decisions are key indicators you might benefit from an advisor.

  • The potential benefits of working with an advisor often outweigh the costs of hiring a financial advisor, particularly when working with a fiduciary. 

  • Look for credentials such as CFP, CFA, or AIF and seeking to ensure you trust your advisor and feel confident sharing your financial goals.



Speak with a fiduciary advisor


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About 360 Financial


360 Financial is an independent wealth management firm with a team of specialized financial advisors and financial planners. As fiduciaries, 360 Financial’s advisors provide fee-only services to business owners, entrepreneurs, and professionals. We help investors with sudden wealth, retirement planning, tax planning, estate planning, and business financial planning. 


Headquartered in Minnesota, we serve investors across the US with online and in-person wealth management and financial planning services.






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