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Is it Time for an Investment Advisor? Ask Yourself These 5 Questions First

The fear of outliving your money can often plague you as you approach your golden years of retirement. Financial investing can be a wonderful way to continue to grow your nest egg and ease your fears.  There are plenty of "robo-advisors" willing to do the investing for you; however, working one-on-one with a real-life financial advisor often leads to better insight and clarity in the investment process.

According to the CFP Board’s 2015 survey, financial advisors have become more important over the course of the past decade.1 This is often attributed to the increasing lifespan of Americans and their desire for professional help effectively managing their money. The survey discovered that “consumer use of financial advisors has increased from 28 percent in 2010 to 40 percent in 2015,” signaling a potential shift in consumers' attitudes towards financial professionals. And while approximately 30 percent of U.S. households have a financial advisor,2  Cerulli Associates, a research firm specializing in global asset management analytics, discovered that investors nearing retirement are more likely to hire one.2 According to their findings, approximately 40 percent of individuals in their 60s have a financial advisor.2

From your needs and objectives to your risk tolerance and timeframe, there are a variety of factors your investment advisor will consider when designing your customized investment strategy. There are five key questions to ask yourself before you hire an investment advisor.

1. How Complex Are My Finances?

While an investment advisor can be helpful in any situation, hiring one is usually more necessary when you have complex issues and questions to sort out. Topics such as inherited stock, investing the assets of your small business, or retirement distribution strategies require more in-depth insight. Even if you’re simply looking for straightforward advice you can apply on your own, many financial advisors offer hourly planning advice that could save you some time and money in the long-run. Teaming up with an investment advisor can be particularly helpful if you are about to experience a transition such as the birth of a child, a divorce, or retirement. Investment advisors can guide you through your decisions as you enter new financial territory.

2. How Much Can I Invest?

Before deciding to engage with an investment advisor it’s important to first consider how much money you have to invest. Some financial advisory firms require you to have a minimum amount of "assets under management" (also referred to as AUM) before they will take you on as a client. It is always worth reaching out to a firm or advisor you would like to work with; because, even if their firm is not a good fit for you, they can often recommend another advisor better suited for your financial needs.

In some cases, a robo-advisor could be a better fit, until you accumulate enough resources to work with an investment advisor. Many financial advisory firms also offer their own versions of robo-advisors, which are "digital investing platforms" for clients who are still accumulating assets and don't yet meet their AUM minimums. It is always worth it to contact the firm in question and find out what they recommend!

3. Do I Need Additional Financial Help?

When looking for someone who can help you invest your money, you can either hire someone who purely specializes in investment management, or you can find someone who offers comprehensive financial planning services. Because comprehensive financial planning involves investing, some may argue that finding a professional who provides this comprehensive style will give you more value for your money. However, if you’re more of a DIYer, it might be worthwhile to simply find someone who can manage your investments. When in doubt, interview a few professionals to gain a better understanding of their services.

4. What Are My Goals?

This probably seems like an obvious question, but some people overlook this critical question and end up in an undesirable situation. For example, you may not have a large amount to invest and simply want to try out a few investments with no concrete plans to continue doing it in the future, trying a robo-advisor first to get a feel for the market before making a more serious commitment could be the best option for you. However, if you’re someone who is certain you want to invest for the long haul, then hiring an investment advisor can give you the accountability you need to achieve your investment objectives. It's always a good idea to identify your expectations of the experience first before you get wrapped up in a long-term commitment.

5. How Much Am I Willing to Pay?

In addition to the potential of losing money in the stock market, you will also incur fees from your investment advisor. Some advisors charge a percentage of your assets under management (AUM), so it’s important to consider how much you’re willing to pay someone to professionally manage your investments. For some people, they would rather save the money and do it themselves. However, an investment advisor is valuable in that they can educate you, as well as apply their knowledge, to help you make smarter investment decisions. At the end of the day, an investment advisor is an investment in itself, so you’ll want to think carefully about what you’re willing to pay for the value they can provide you.

https://www.cfp.net/docs/default-source/news-events---research-facts-figures/2015-consumer-opinion-survey.pdf

https://www.guidevine.com/roundtable/new-data-shows-growing-financial-advisor-shortage/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.