Is a Financial Advisor Right for You?
Some might consider it a luxury, but having a financial planner can help you prepare for a better future – and that’s a luxury everyone deserves.
Have you ever decided to embark on a project outside of your expertise?
Perhaps you convinced yourself that with the right tools and enough research, you could figure it out on your own. Although this may work in some cases, things don’t always turn out as you planned. When it comes to organizing your finances and planning for your future, is that a risk you are willing to take?
“If I need to build a deck, I’m sure I could do it, but I’d rather contact an expert,” says Rob Roberts, a Financial Consultant with First Midwest Financial Network. “Sometimes it’s not just about having the tools, but knowing what to do with them.”
So although you might be capable of managing your finances on your own, financial consulting professionals have made a career of it.
How a Financial Advisor Can Help
Dick Van Dyke, president of Dick Van Dyke Financial Ltd. in Springfield, IL, says people who don’t work with a financial advisor are likely to overlook things. “A financial advisor will think through scenarios someone else might not normally think through,” Van Dyke says. “That’s where a financial advisor becomes invaluable.”
It’s a financial advisor’s job to organize courses of action for circumstances that are extreme and unlikely, but still possible, such as hyperinflation or even deflation. More importantly, Van Dyke says a financial advisor will think ahead and plan for situations people typically find uncomfortable. No one wants to think about the death of a spouse, but it could cause a loss of Social Security and pension benefits for the survivor. Financial advisors even look at the life expectancy of a client’s family members when organizing his or her finances as it can give an indication about the client’s own life expectancy, Van Dyke says.
Van Dyke says a financial advisor will also present you with much needed perspective. For example, most people look forward to spending their retirement years doing recreational activities, such as traveling. A financial advisor will help you set aside funds for discretionary purposes, but will also make sure you’re putting away enough to cover living expenses and other financial concerns that arise as you age, such as increased health care costs, assisted living costs or any inheritance you want to leave your relatives.
“People can deceive themselves into thinking they need more or less money than what they actually do,” Van Dyke says. “And while you don’t want to leave out the fun things, a financial advisor can bring balance and a truer picture of reality.”
What are the Typical Costs?
Because financial consulting is a process that involves collaboration between you and your advisor, billing and rates are generally flexible, from hourly rates to fees for opening an account to annual expenses.
At First Midwest Financial Network, clients can work with a Financial Consultant to receive an initial free consultation. Financial Consultants work with clients to determine their hopes, plans and dreams. By taking a big picture view of clients’ goals and life stage, Financial Consultants help clients build a solid plan to help meet both short-term and long-term needs.
Choosing a Financial Advisor
There are many qualified advisors with great ideas, but in the long run, it’s best to work with someone you trust. “My first and foremost piece of advice is to work with someone you feel comfortable with,” Roberts says.
Many advisors work with their clients for years, which allows them to build a long-term personal relationship. Roberts says his clients often talk to him about their personal lives, such as a recent health scare or where their kids are planning to go to college. By handling such confidential personal information over the long term, he establishes a strong foundation of trust. His clients even go to him for advice beyond finances, such as where to find a good lawyer or dentist.
“The relationship goes a lot further than only a transaction here or a transaction there,” he says.
Building this trust usually comes from a mix of having similar investment philosophies and a personal connection, Roberts says. You both want to be on the same page about what you think will make a financial plan successful. Roberts says he once told a client that they might not be the right fit for each other. The client wanted someone he could be in constant contact with because he was interested in trading daily in his account.
This differed from Roberts’ philosophy of buying and holding stocks then waiting for the market to perform. Because each had a different approach, Roberts felt it was not a good match. Finding an advisor who shares your ideas of how to invest will help you both develop clear goals, and listening to your gut instinct will help you find someone who not only looks good on paper but with whom you also feel a connection.
Here are some important questions to ask to help determine credibility and whether or not you and the planner are a good fit:
- What’s your process, and how can it help me get from where I am now to where I want to be?
- I have X amount of money to work with; what does that mean for the type of commitment I’ll get from you?
- How long have you been a financial planner, and why did you choose this profession?
- What are some financial hurdles you’ve helped clients overcome before?
- What accreditations and association memberships do you have? Do you specialize in any specific area?
A financial advisor might seem like a luxury, but Roberts says the financial landscape can be difficult to navigate, and an advisor can help you sort through it. Van Dyke says a good advisor who has been around for a while is not easily rattled and can identify your concerns.
“I feel that the best opportunity in hiring a financial advisor is having someone who can keep a steady hand on the wheel,” he says.