It can be easy to fall into the trap of thinking that you don’t need help from anyone when it comes to your finances. After all, there is that saying, “Too many hands in the pot will spoil the sauce.” However, when it comes to deciding whether to hire a net worth advisor, you shouldn’t have that fear. Financial advisors work to help you achieve your long-term financial goals and make the most of the money you have.
In this guide, we will discuss what exactly a financial advisor does, when you should hire a financial advisor, and the benefits of hiring one.
What Does a Financial Advisor Do?
The financial advisor definition is a person you hire to assist you with financial management. They can help with taxes, increasing return on your investments, planning for the future, and more. Let’s take a closer look at what they can do for you.
Financial advisors not only help you ensure you file your taxes correctly, but they can also help you determine which taxes are unnecessary for you to pay so that you can save more money to invest. They have to know about your financial goals and situations to do this as accurately as possible. They can even advise you on ways to invest to avoid heavy taxes. If you would prefer to do your taxes on your own, they are available to help with any issues that may arise. It is important to note that not all financial advisors are certified in doing taxes, so if that is something you want help with, double-check that your financial advisor is.
Planning for the Future
A big part of what financial advisors do is help you plan for the future. Once they know what financial goals you have, they will create a strategy to help you save money and reach those goals.
- Big Events or Purchases: If you are planning on spending a good chunk of money on a big event or purchase (such as a wedding, house, car, etc.), financial advisors will look at your current financial situation as well as market predictions and the economy to advise you on the best way to save money for the type of celebration or purchase you want.
- Education: Like with big events and purchases, financial advisors will aid you in saving money for your children’s education so that they don’t have to worry about paying loans down the road.
- Retirement: What does a financial advisor do for a 401k plan? All financial advisors can give advice on how to save enough money to maintain your quality of life into retirement. A financial advisor providing net worth advice will be able to help select the appropriate investments for you. Advisors at big Wall street banks will not help advise on 401k investments.
- Long-term Care Planning: If you start to find daily activities that you are struggling with more and more, such as grocery shopping, housekeeping, or taking medications, it may be a sign that you will need long-term care in the future. The median costs for long-term care in the United States as of 2021 range from $20,280 (for adult day health care) to $108,408 (for a private room in a nursing home facility) per year. If you start to see signs that you will need long-term care (as 7 out of 10 people do), a financial advisor can assist you in making a plan so that these expenses do not fall on your loved ones.
- Inheritance and Estate Planning: A financial advisor can help you determine which assets will be a part of your inheritance or estate, who your beneficiaries will be, and when your beneficiaries should receive these assets. They will also find a way for your beneficiaries to pay less estate taxes where possible.
Do you own your own business, or do you plan on starting one? Financial advisors can help you develop a business plan to increase return on investment and decrease unnecessary spending. Because financial advisors have a better understanding of what the market and economy are doing and how they might perform in the future, they can provide you with projections to help you grow your business. They are also there to ensure that you give both your personal and business finances equal attention so that one doesn’t suffer because of the other.
Increasing Long-term Wealth
Not only do financial advisors guide you on saving money, but they will also advise you on how much and where to invest your money to see financial growth. Their suggestions will generally be based on how much money you need to achieve your goals, how soon you need that money, and how long you plan on investing your money.
Life insurance policies ensure that your loved ones have the means to continue to live the same quality of life once you pass away, especially if your death is unexpected. Some financial advisors can sell you life insurance so that your loved ones are taken care of once you’re gone. In order to maintain a client first business model many financial advisors do not accept any commissions. These advisors partner with a life insurance specialist for their clients’ needs.
Financial Planner vs Advisor
Because financial advisors do a lot of planning, it may be difficult to tell the difference between them and financial planners. A personal financial planner is a specific type of financial advisor. They assist with:
- Creating strategies to save money and invest so that you can meet your financial goals
- Tax planning
- Retirement planning
- Planning your estate
- Managing investments
- Saving for future events and purchases
They do not help with any of the following additional tasks that other advisors assist with:
- Life insurance
- Real estate
- Accounting or banking services
- Short-term trades
If you want someone to help you with all aspects of your financial journey, a financial advisor is a better option. The financial advisors at Delta Wealth Advisors:
- Utilize an evidence-based investing approach
- Construct portfolios using proven, risk-based investments
- Continuously monitor your investments and maintain liquidity when needed
- Focus on rules-based, low-cost investments
- Incorporate tax-minimization strategies
What Are the Benefits of Using a Financial Advisor?
There are several benefits to hiring a financial advisor, including reducing the stress of managing your finances on your own and helping you to avoid making emotional decisions when investing. These and other benefits are listed with more detail below.
Creation of Personalized Plans
You have financial goals in mind, but where do you start? A financial advisor can tell you that as well as all the steps that you need to take in your journey to achieve those goals. Financial advisors create personalized plans based on how much money you have and what you are striving towards. If your goals change down the road, your financial advisor will assist you in coming up with a new plan so you don’t feel as though you have to start from scratch.
Managing your finances can be overwhelming, especially when you are working with a lot of money, running your own business, or have made several investments. Hiring a financial advisor allows you to place some of that burden on an expert who better understands your finances, the economy, and your options. Instead of spending hours combing through your finances, searching online for answers to your questions, and projecting what the market will do next, you can hire someone who will do those tasks for you.
Remove Emotion From Investing
It can be easy to fall into the trap of making investments based on what your gut tells you. As soon as the market starts taking a turn for the worse, it can be easy to invest your money someplace else out of fear. However, these instincts don’t always work in your favor, especially if you don’t have a complete understanding on how the market works or what the experts project. Financial advisors know finances and how to make the most of your money. They will look at both your finances and at the market to make sure that your investments are well thought out and will even give advice on where to invest based on what their data says.
Tax Filing Assistance
Taxes get especially complicated if you own a business or have a lot of investments. A financial advisor can file taxes for you or give you guidance if you want to do them on your own to ensure that you do not make any mistakes that you’ll be penalized for later. They will also show you where you can save money when paying for taxes.
Different types of investments affect your finances differently. Below are a few examples:
- Business Investments: Boosts odds of multiplying your invested capital
- Real Estate: Offers higher income and more stable pricing in downturns than bonds
- Capital Markets: Aids in paying for unexpected needs
- Cash: Helps fund opportunities during recessions
To learn more about the pros and cons of investing in each of these types, Delta Wealth Advisors gives more information here. With help from a financial advisor, you can better understand where you should invest and why so that you get the most for your money.
The benefits of using a financial advisor sound well and good, but what should you consider when deciding whether to hire one? First is the money.
How Much Money Should You Have Before Hiring a Financial Advisor?
A general rule of thumb is that you should have $100,000 in assets if you plan on hiring a financial advisor. However, this number can range from $50,000-$1,000,000. At Delta Wealth Advisors, we consider high worth individuals anyone who has at least $1,000,000 in assets. However, that does not mean you cannot hire a financial advisor if you do not have that much money. If you’re wondering, “Should I get a financial advisor in my 20s” but do not have $1,000,000, Delta Wealth Advisors still offers a financial advisor to you. We have a Trailblazer Path for High Earners, Not Rich Yet (HENRYs) who have less than $1 million but have a bright future and need help with more than retirement.
“Should I use a financial advisor or do it myself?” you might be asking. Our checklist below provides some guidance on that.
Do I Need a Financial Advisor? Quiz
If you are unsure whether you should hire a financial advisor, go through this checklist for guidance.
- You have a complex financial situation. If you own a business, have several investments, or recently received a large inheritance, the odds that you have a complex financial situation is high. If upon looking up guidance online, you still struggle with managing your assets, hiring a financial advisor is in your best interest, especially when tax time rolls around.
- You are a high net worth individual. If you have at least $1 million in liquid financial assets, then you are typically considered a high net worth individual. At Delta Wealth Advisors, we consider ultra-high net worth individuals anyone with $10,000,000 or more, but we will also work with HENRYs who have the potential to earn that much in liquid assets.
- You want to invest more money. If you want a high return on investment, you will want to make sure that you know what your options are and how much you should invest without being either too conservative with your money or investing too much and putting your finances in danger. A financial advisor can help with that.
- You make emotional decisions with your assets. Let data drive your decisions instead of your emotions. In the long-run, data is more reliable than emotions, after all. Hire a financial advisor to give you the data you need to make responsible decisions.
- You are close to retirement. If you want to sustain your current quality of life into retirement, you will need to make sure you have enough money saved to do so. A financial advisor can help with that.
If you answered yes to even one of these questions, hiring a financial advisor is probably a good idea for you.