You may have heard of financial advisors – those professionals who help you manage your money.
The goal of a financial advisor is to provide professional financial advice and services to help you improve your money situation. Yet, many millennials do not enlist the aid of a financial advisor. Perhaps it’s because they don’t quite understand what they do. Or, in many cases, they don’t think they need financial advice. As a result, there are a lot of negative, preconceived notions about financial advisors. Perhaps this leaves you with endless excuses for not hiring one.
The truth is: Everyone can use professional financial advice, whether you’re setting up a strong future for yourself or a seasoned pro planning for an early retirement. So, let’s turn this issue on it’s head with this question: When do you need a financial advisor?
If you’re not convinced yet, here are 5 reasons why you should hire a financial advisor.
1. Financial planning is hard, but taking advice is easy
We live in an age where almost everyone takes pride in being a do-it-yourselfer. While DIY can be great for saving money on projects, it’s not always the best way to go about every aspect of your life.
Take financial planning. Is it possible to invest your money and monitor it every single day for your entire life? Absolutely. But is it worth the time and stress, especially if you’re not good at this? Probably not.
Financial advisors have vast, extensive knowledge to make financial decisions with your best interests in mind. Because they are a third party, they can also help mitigate emotions that can arise when you have to deal with your money matters.
Financial advisors also closely monitor your investments, which takes the confusion, unnecessary stress, and massive time commitment out of the process for you. Remember, it is the advisor’s job to manage your finances so that you can worry about other things.
2. Financial advisors cost money, but their job is to make you money, too
Having a fee-based financial advisor is essentially having your own personal financial consultant that works for you.
Even though financial advisors charge you for their services, it is in their best interest to help you invest your money wisely. Why? Because fee-based financial advisors often charge you based on how much you have invested. Therefore, the more money they help you invest, the more money they make for themselves.
It’s a win-win for both parties.
3. Yes, you can afford a financial advisor
Let’s make sure we are all on the same page about how fee-based financial advisors make money.
For starters, it is important to know that there is a difference between financial planners and financial advisors.
Financial planners usually charge a flat or hourly rate to give you a comprehensive financial plan for your unique financial life. This doesn’t include managing your assets.
On the other hand, as stated above in #2, fee-based financial advisors tend to charge you based on how much money you invest and earn. While they still invest your money based on your financial plan and goals, they are constantly managing the money that has been invested in order to make you more money.
Usually, they get their fee by charging you a small percentage of your investment value each year. On average advisors charge one percent, but it is a good idea to discuss this with an advisor before you hire him.
Here is an example of what it can cost to hire an advisor. If you were to invest $3,000 and the financial advisor charges you one percent, you will pay $300 each year. Keep in mind that more than likely, the returns on your investments are going to be higher than what your advisor charges.
Pro tip: If you want to free up more money for your advisor to help you invest, try using Chime’s auto savings feature. Every time you make a purchase with your Chime debit card, your purchase will be rounded up to the nearest dollar and the round up amount will be deposited into your Savings Account. It’s an easy way to save money without having to think about it!
4. It’s never too early to start saving for retirement
Everyone always says that it’s never too early to start saving money. It’s true.
Financial advisors don’t just invest your money willy-nilly in any way that they see fit. A good financial advisor will sit down with you and discuss your financial goals. This way they can tailor your investment portfolio to your specific needs. This includes choosing and managing a diverse investment portfolio that will set you up for a comfortable retirement. So, make sure you discuss retirement goals with your financial advisor right from the get-go.
Investments grow exponentially over time. For example, if you invest $10,000 today and have a five percent return rate, you will end up with about $44,000 in 30 years. This is assuming you do not contribute any more money to your account during those 30 years. If you do contribute even just $100 monthly into that same account, you will end up with about $128,000 in 30 years.
A financial advisor can help you maximize your earnings and save for retirement so that you don’t have to figure this out for yourself.
5. You can always break up with your financial advisor
If your financial advisor is no longer working out, and you want to switch to a new advisor or go it solo, it may be time to walk away. Unless you sign a contract stating otherwise, you can part ways with your financial advisor at any time for any reason.
If you did sign a contract, just be wary of any potential termination fees or implications. Keep in mind that breaking up with your financial advisor should be a decision that will better serve your finances.
The upshot—it’s time to hire a financial advisor
As you can see, there are bountiful benefits to hiring a financial advisor.
If you aren’t sure how to find a financial advisor or even where to start looking, try checking out a few sources such as The National Association of Personal Financial Advisors (NAPFA) or this helpful guide from U.S. News & World Report.
Keep in mind that getting a professional financial advisor now is the best way to set up a promising financial future for yourself. So, with that said, go get a financial advisor!
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.