Thinking About Hiring a Financial Advisor?
Should you use a financial advisor to help you with your money? What questions should you ask before you hire a financial advisor? These are valid questions you need to ask as an advisor will be helping you with your wealth.
Before you decide if you need a financial advisor, you should look at your situation. Do you invest? Do you own a business? Do you own real estate? What is your debt load? Do you have adequate insurance to pay off your debt and leave your family secure? What are your financial goals? What major expenses are coming up in your future?
The above questions will help you decide if you need a financial advisor. Here is another question to consider—what does a financial advisor do? Knowing what they do will help you determine if you need one.
What Does a Financial Advisor Do?
Financial advisors help clients develop a financial plan based on their financial goals. Financial advisors review your:
- Investments (this includes real estate)
- Savings
- Budget
- Debt management
- Insurance
- Tax strategies
- College planning
- Retirement plan(s)
- Eldercare for parents or grandparents
- Estate planning
After they help you set up the initial plan, they continue to monitor your circumstances. If needed, they help you adjust your plans.
Investment Options to Consider
When investing, you want stable, secure options. If you like to invest in riskier choices, having sound, secure options will offset those risks. They could keep you from losing everything.
Dividend aristocrats are stocks whose dividend payments have increased for 25 years. Shareholders’ dividends increased through both bull and bear markets. They are very stable and desirable stocks.
Calculating Your Business’ Actual Value or Real Estate Portfolio
The first step a financial advisor takes is to understand your financial health. You complete a questionnaire.
You will need to determine the EBITDA of your business or your real estate portfolio. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This measures a company’s financial history.
EBITDA shows the operating profitability of a business. Investors and financial advisors use this amount as the actual profits of a business. The EBITDA figure will go into your financial health questionnaire.
Types of Financial Advisors
- Robo-advisors – A computerized service with simplified, low-cost investment advice. You answer questions in an online form. Then the computer builds an investment portfolio based on your goals.
They help people with mid-and long-term goals invest. They are good for retirement investing. They give preconstructed investment options you can choose from. The cost is low, and sign-up is easy. You can start investing with little money.
- Online financial advisors – an online service with options to talk online with a human, financial advisor. A team of financial advisors is available to answer questions, or you can choose to have a human, financial advisor dedicated to your needs. They will manage your investments and help you create a financial plan.
- Traditional financial advisors – include registered investment advisors, financial consultants, certified financial planners, stockbrokers, and wealth managers. One person could do several of these financing options. The cost is higher, and so is the amount of money you place in your investment account. When your financial situation is complicated, or you need special services.
How Much Should You Pay?
- Robo-advisors charge an annual fee which is a percentage of the balance in your account. Usually ranging between 0.25% to 0.50%. On a $10,000 balance, that would be $25.00 up to $50.00 every year.
- Online financial planning services charge a subscription fee (flat-rate), a percentage of your account balance, or both.
- Traditional human advisors can charge a percentage of the amount they manage. The average is 1%; it can be higher or lower depending on the account. Some charge a flat fee, an hourly rate, or a retainer.
Investigate Anybody Who Will Be Managing Your Money
Investment advisors must file a Form ADV with the SEC and state securities office. If you are considering working with an investor or firm, check them out.
Ask questions to determine if they will meet your investing needs. Will they be available when you call? In addition to their fee, what other fees will you pay? Will any of the investments they make for you cause a tax consequence? Do they get a commission to sell your products?
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