Do I need a Financial Advisor?
Do I need a Financial Advisor?
By Armstrong Williams
July 9, 2005
Do you really need a financial advisor? If you’re planning your long term financial goals, or if you just inherited a lump sum, then the answer is yes. It would be penny wise and dollar foolish to adopt a do it yourself attitude for long term investing. In order to identify good growth stocks and manage long term goals you’re going to have to rely on the experts. Yes, a financial advisor will cost you money. But do you really have the time or energy to pour through reams of tax codes to become an expert? Maybe you’ve done a little day trading on the internet. But do you really know how to develop a long term financial plan? Adopt a do it yourself mentality for your long term needs and you will end up short changing yourself down the road. So here are a few tips as to what you should look for and what you can expect in a good financial advisor.
Seeing a good financial advisor is like seeing a good therapist. You get unbiased feedback on the most important things in your life. Sometimes we lack the big picture perspective. Our emotions and desires wreak havoc with our ability to pragmatically assess our own financial goals. Trust me. People make emotional decisions when money is involved. With something as important as your long term finances, you want someone who can step back, look at the big picture, and offer an unbiased assessment of what you need to do to achieve your goals.
A financial expert can help you allocate your funds, so that you can balance short term goals (like sending the kids to college) with your long term needs (retirement). They can minimize the tax burden at each turn, and ensure that your assets are properly protected through appropriate insurance plans.
That said, there are some very important things you can do to ensure that you get a financial advisor that best meets your needs. Step 1: prepare for the meeting. Here’s where a do it yourself attitude comes in handy. Read literature. Think about what kind of risks you are willing to take. Most importantly, talk to everyone you know about their experiences with financial advisors. Financial advisors are a dime a dozen. You have to weed through all the promotion and make sure you find a professional who can help you meet your goals. The best way to do that is to talk to people about their first hand experiences with their financial advisors. Some good things to keep in mind are whether the advisor is easily accessible and whether he periodically reviews his client’s needs. The internet is full of ads for financial “specialists.” Go to a web site for free financial advice and you’re generally going to get what you paid for. The best way to avoid cookie cutter advice is to talk to people about their experiences. There really is no substitute for finding a financial advisor with a good reputation.
Next, make sure you know what you want to get out of the interaction. Make a checklist before your first meeting. Don’t be shy about asking the advisor about his credentials. Make sure you find out whether you will be working with him regularly. You need to be able to let him know when your financial position changes. Make sure he consults with you whenever he augments your long term plan. Most importantly, find out how he gets paid. Financial advisors get charged a number of ways. Often the best choice is one who is compensated as a small percentage of assets under management because their goals are in line with yours. The better your investments perform, the more they will get paid. Others will charge a flat fee but be careful you are not getting "cookie cutter" advice. And remember, be very wary of investors who offer quick riches. You want thorough analysis of long term needs. Not a scheme.
A financial advisor can be integral to achieving your long term financial goals. If you do rely on a financial advisor, though, make sure you’ve thoroughly checked his credentials, his method of compensation. And don’t be afraid to pass on a specialist who you don’t feel comfortable with. Trust is crucial. You have to develop a long term working relationship with your financial planner. So be picky, and find someone who will be there for you. It will pay off in the long run.
www.armstrongwilliams.com
