Jean Chatzky
Do one thing: If you are considering working with a financial advisor, ask some of your current colleagues and/or trusted friends who they use.
Weighing the Pros and Cons of Financial Advisors
Research shows that just over one-third of U.S. adults – some 35% – work with a financial professional. Why not more? One reason could be that many people believe that a financial advisor or financial planner is only for the wealthy or perhaps costs more than they can afford right now.
Don’t Miss Out on Opportunities
The truth is, if you’re not already working with a financial professional and receiving the advice you need, you may be missing out on opportunities to untangle any current money issues you’re facing and lean into potential wealth-building opportunities.
The Potential to Save More Sooner
A 2024 planning and progress study from Northwestern Mutual shows that American adults who have an advisor expect to retire at age 64, which is two years sooner than those not using an advisor (age 66). More importantly, the report also found that those using an advisor have already saved twice as much money for retirement than people without an advisor: Approximately $132,000 compared to just $62,000 for those going solo.
Behavioral Coaching
Another benefit to working with a financial advisor can be the behavioral coaching they provide, notes Said Israilov, a fiduciary financial advisor based in San Francisco. “A skilled financial advisor instills discipline and guidance during times of market volatility while also helping to maintain a focus on long-term financial goals,” he says. “I believe this can add a huge amount of potential value to clients’ financial well-being, for example, reaching both short- and long-term financial goals.”
Emotionally Detached Investing
“Because many people can be driven by emotions,” Israilov explains, “their decisions are often impacted by short-term events: negative headlines on the economy, TV anchors predicting the next recession, financial influencers peddling the next hot investment. In these instances, the financial advisor’s role is to listen first, acknowledge and recognize clients’ fears and anxieties, and only then help instill emotional detachment in their thought process,” he says.
Finding The Right Financial Advisor
So, if you think it may be time to consider lining up a financial planner, the next logical step in the process is choosing someone who best meets your individual needs.
Financial advisors can help individuals, couples, and families with a variety of investments and more, including:
- Where to invest a 401(k) or individual retirement account (IRA).
- How to develop a retirement income plan.
- When to manage certain investments in your portfolio.
Step-by-Step Guidance. Many people hire a financial advisor because they want a step-by-step plan that looks at all of the variables they have, including:
- What to do with old 401(k)s.
- How to utilize money market accounts.
- How to work with inheritances.
- How to manage life insurance policies.
A planner can connect the dots and tie everything together so you can have a better understanding of what you need to do to set yourself up for a better future.
Questions to Ask Financial Advisors
Here are some of the most important questions to ask potential advisors as you search for someone to help you navigate your investments and other financial matters.
- Are You a Fiduciary? A fiduciary is someone who is required to put your interest first and won’t get paid to offer you products you may or may not need.
- How Do You Get Paid? Financial advisors can be paid in several different ways. Some make commissions. Some charge a fee by the plan, and some charge a percentage of the assets you give them to manage. Some fiduciaries even lay out what they charge on their websites so you can get an idea of how much it will cost before you ever schedule a meeting.
- What Will I Get For My Money? Because some advisors only focus on investments, it’s important to know what a potential advisor will help you with. Will you get a financial plan? Other guidance? Fortunately, some advisors take a more holistic approach to your life, checking out your estate plan and your taxes (in addition to your portfolio) and bringing it all together – which is something that I prefer.
Picking the best advisor for you
When it comes right down to it, you have to feel extremely comfortable with the advisor you choose and be able to open up about your finances, including saving (and spending) goals for the future. If you interview someone whom you don’t think you can be honest with, it’s probably a good idea to keep looking. You need to find someone you can trust and can speak openly with for years to come.
With reporting by Casandra Andrews
Chris O'Shea
