“Do you really need a financial advisor, or should you just do it yourself?” I hear this question a lot, as financial planning and tax planning often go hand in hand. Managing investments is complex, and there are many nuances that the everyday person may not understand or overlook. Expert guidance can help you reach your goals and reach them fast, but some people excel with the DIY approach.
Which one is right for you? Let’s explore whether you need a financial advisor and learn more about their role in building your wealth.
What is a Financial Advisor?
Financial advisors help their clients build wealth while reducing financial risk. They can help with a wide range of financial planning needs, from retirement savings to handling a financial windfall.
While most people are familiar with the idea of a financial advisor, their role is often misunderstood. They’re more than just order-takers. They are trusted advisors who serve as guides to help you reach your financial goals.
What Can a Trusted Financial Advisor Do For You?
If advisors are more than just order-takers, then what do they do? First and foremost, your advisor should do two things:
- Help you create a plan that focuses on your end goal, not just individual pieces. Rather than focusing on just tax planning or estate planning, an advisor will help you create a comprehensive plan to reach your ultimate goal.
- Be your guide. Along with creating a comprehensive plan, your advisor should be there for you, guiding you through important decisions. Trusted advisors ask, “what do you need?” and not just “what do you want?” They’re not afraid to tell you “no” or “stop doing that” if it’s a decision that could harm your financial health or sabotage your goals.
An advisor can help you consider things you may not have considered before and reshape your mindset about investing.
Creating and Implementing a Successful Financial Plan
A financial advisor’s job is to understand your goals and help you create a financial plan to reach them. The plan created by your financial advisor should do several things:
- Have a purpose, such as how to handle a financial windfall or how to save for retirement. Your advisor should evaluate your goals and compare alternatives to help you find the best path forward.
- Consider the impact of your decisions. For example, will there be tax implications that need to be considered? Your advisor can help you see the big picture.
- Look at alternative paths. A comprehensive financial plan will look at the “what-ifs” to help ensure that you’re making an informed decision. Let’s say that your goal is to retire at 50. With what-if analysis, you can see what your retirement may look like if you worked until 55.
- Use risk simulation. No one can predict the future, but with risk simulation, you can build a solid plan and move forward with confidence.
Once you have a plan, your advisor will help you implement it. Remember – they also serve as your guide to assist you through the process.
Do I Need a Financial Advisor?
Now that you understand what a financial advisor can do for you, you may be wondering, “Do I really need one?” The answer really depends on your goals, lifestyle, and other personal factors.
You may need a financial advisor if:
You Don’t Have the Time to Manage Your Investments
Financial advisors exist for a reason – managing investments isn’t easy. It’s a time-consuming process that requires skill and effort. It’s also an ongoing job.
If you already have a lot on your plate, consider whether you really have the time to act as your own financial advisor. Unless you’re already an expert, you can expect to spend a lot of time researching your options and executing your decisions.
If you can’t dedicate enough time to manage your investments properly, then you jeopardize your financial future and risk never reaching your goals.
Even if you do have the time, is this something you want to do? If you’re not passionate about investing, then your time may be better spent on something else.
Be honest when considering whether you have the time and inclination to take a DIY approach to investment management.
Your Finances are All Over the Place
If you’re not sure where you stand financially and you have accounts all over the place, it may be worth it to work with an advisor. An advisor can help you make sense of your finances, know where you stand, and help you build a plan that takes you where you want to go.
You’re Considering a Major Financial Decision
Some financial decisions are life-changing. Maybe you want to retire early, or you’ve inherited a large sum of money and want to put it to good use.
Major decisions such as these are often emotionally charged. An advisor can provide not only expertise and experience but objectivity to help you make the best decision based on logic.
You may never get another opportunity to make such a life-changing financial decision, so it’s important to get it right.
You’re Stressed About Money or Unsure Your Capabilities
For many people, having a financial advisor gives them peace of mind. Advisors are experts in their fields. It’s their job to help clients build their wealth and reach their financial goals.
Acting as your own financial advisor can be stressful, especially if you’re already stretched too thin at work and in your personal life.
An advisor can provide the guidance, expertise, and support you need to reach your goals and move forward with confidence.
Making the decision to hire a financial advisor is personal and shouldn’t be taken lightly. If your first instinct is to take the DIY approach, consider whether you really have the time and inclination to manage your investments properly. An advisor can help eliminate money stress while helping you confidently plan for the future.
To learn more about how KPN Enterprises can help you with financial planning or to schedule a call, contact us here.