Everyone knows that making your money work for you is the best way to prepare for a sound financial future. If you lack confidence, though, in how to put your money to work, you may want to hire a financial advisor.
Anyone who meets at least two the following criteria should consider hiring a financial advisor:
• You lose track of where some (or all) of your money goes each month.
• You lack the time, ability, or desire to research investment options.
• You’re experiencing a life change, e.g., marriage, and blending multiple incomes/portfolios is more complex than you anticipated.
• You don’t know how much you should be setting aside for retirement.
• You’re sitting on cash that’s not being used.
When we talk about money for investing, we’re not talking about that $10 you found in your back pocket while doing laundry. You can find financial advisors who are willing to advise people who have as little as $50,000 to invest. The 1 percent fee that most advisors charge, which amounts to $500 on a $50,000 account, won’t make your account worth very much to a busy advisor, and advisors who are willing to handle such smaller accounts will likely give you what you are paying for.
To hire a reputable financial advisor, you will probably need at least $250,000 to invest. Not only does this amount give them enough of a financial incentive to truly work for you, but it also ensures a sufficiently sized investment to pay you enough dividends to justify paying someone else to manage your money. Paying 1 percent of your money per year over 30 years isn’t inexpensive, so you want to make sure you’re investing enough—and getting enough back—to make the endeavor worthwhile.
There is really no set age for when you need to hire a financial advisor, but once you are making enough money to comfortably pay your bills while also setting some money aside, you should consider it. If you wait to begin a portfolio until you’re in your 40s, you’ve effectively let half your potential investment time and money go by the wayside.
The need to look into the matter becomes doubly important if you start a family. Remember this important point: You can never start preparing too early for retirement and paying for your children’s college education. You and your spouse should discuss your financial future right after the honeymoon, if not during the planning stages of your wedding.
A great many Americans work with financial advisors, so you would not be alone if you choose one. The Investment Company Institute reports that U.S. investment companies handle an aggregate $13 trillion each year on behalf of clients. Mutual funds (owned by 44 percent of U.S. households) and pretax retirement accounts, such as 401(k) accounts, (held by 69 percent of U.S. households) are among the most popular investment options.
Whether you use one of these means or some other, you need to be prepared once you decide to seek a financial advisor’s services. You should take the following documents with you:
• Bank statements
• Investment account statements and profit-sharing plans
• Pay stubs
• Social Security benefits, if applicable
• Tax returns
• Insurance policies
• Any other assets with rough values
• Debt statements with balances
• Estate planning documents, if any
• Living expenses/household budget
You should also have some specific goals in mind. Consider how much you need to retire, at what age you want to retire, what you want to leave behind to any surviving relatives, and what you’d like to do for the rest of your life (such as extensive travel or possible business ownership). The type of life you want to live going forward also matters. Knowing you want that vacation home, boat, or luxury car will help your planner get them for you. Your advisor can help you take a step toward the finer things in life or prepare you to just live comfortably enough to enjoy your final years. A financial advisor works for you, so you need to ensure that you’re receiving the best possible advice.
You also need to find out what you don’t know about your finances. This necessary step may seem to be a paradox, but the more you learn in advance about the basics of financial planning, the better prepared you will be to discuss with your advisor what might be right for you. Don’t be afraid to ask around: Taking advice is great, but you also don’t want to just blindly follow someone.
To ensure that the relationship is beneficial, you need to ask the right questions. If you don’t walk away from the meeting completely satisfied about what could happen to your money, then don’t return. If someone tries to impress you by speaking in terms you don’t understand, that person is likely more concerned about winning your trust—and your money—than doing the best they can to help you. Conversely, if the advisor appears uninterested in your needs, he probably won’t invest the maximum attention to your case.
If you have any doubt, there’s one surefire question you can ask that should tell you all you need to know. Ask your potential advisor that if he or she were in your identical financial situation would they make the same moves they’re suggesting you make. A “no” reply or any hesitation probably indicates they have some ulterior motive in mind, which could range from maximizing their own profits or letting your portfolio languish because they don’t consider it worthy.
To be sure, not everyone who becomes wealthy needs a financial advisor’s guidance, but many people do. Do not be ashamed if you need a little advice. Even if you hire an advisor on an hourly basis every few years to do a “portfolio checkup” on your behalf, you want to be sure your moves are the right ones. Don’t be intimidated by the world of financial investing. Men and women from the simplest backgrounds and means have learned how to become excellent investors. You can too. Just know where you want to go. You will get there—and there’s nothing wrong with getting a helping hand along the way. Please contact R. W. Rogé & Company and ask to speak with one of our financial advisors to learn more.