The fundamental principles of sound personal financial management are, frankly, quite straightforward and well within the grasp of just about everyone. These principles, combined with tools that are readily available at no cost from online providers or financial services firms, make it easy to manage your own finances. Throw in discipline, patience and occasional assistance from tax or legal professionals and you are on your way to financial freedom.
If only it were that easy. Here are just some of the reasons it may make sense to establish a relationship with a financial advisor.
Enough that it matters – In early and mid-adulthood it is often a challenge to simply keep up with starting a career and family, buying a first home and beginning a saving program. One day you wake up, your savings and net worth have grown considerably, and the consequences of making mistakes have similarly grown. A financial advisor can serve as an “insurance policy” to help you avoid those costly mistakes.
The end is in sight – It is not uncommon that having “enough that it matters” coincides with specific planning for the holy grail of retirement. A financial advisor can help evaluate pension and retirement options, assist in budgeting and construct investment portfolios that are consistent with retirement needs.
Getting started – Though the amounts may not be large, the fact that even small amounts can grow very large over time increases the importance of getting a good start on personal finances. Many financial advisors will offer guidance to younger investors, and it is a good idea to revisit that resource as each new financial challenge pops up.
Information overload – While the fundamental principles have not changed, our instant-gratification, media-driven culture is happy to present the latest fad as revolutionary. This constant reporting, combined with conflicting opinions and self-serving recommendations, are enough to confuse anyone and knock even the best long-term plan off track. Honestly identifying your priorities and goals and working with a financial advisor can insulate your finances from these often risky fads.
Family relationships – Often one family member is heavily involved in the family’s finances while others are not financially astute. It can be helpful to establish a relationship with an advisor so that a spouse, child or other family member will not be adrift if the family financial manager becomes incapable or unavailable.
A complicated life – With blended families, education costs, business ownership, multiple marriages and multi-generational wealth transfers, things can get very complicated very fast. A financial advisor can help ensure that all these areas receive the resources and attention they deserve.
Time is money – Americans have the longest workweek in the industrialized world, family demands seem to constantly grow and at some point it is nice to have some leisure time. For the same reason few homeowners these days clean their own house or do their own yard work, it may make sense to outsource your financial management to a financial advisor whose full-time job is to keep clients on track with their goals.
Big changes – The best laid plans often go awry, and financial plans are easily disrupted by any of life’s big changes – marriage, divorce, career advancement or decline, health situations, children. Continuing full steam ahead with a plan that was designed for past circumstances could leave some needs unaddressed. A financial advisor can evaluate these changes and their impact, and most importantly can make them seem less scary from a financial point of view.
Big picture – Often a collection of individual decisions, which may have been prudent and sound at the time, does not make a coherent overall financial plan. A financial advisor can determine whether these decisions are in conflict or working at cross-purposes and can help maximize the effectiveness of the available resources.
A nasty business -Many of those who are willing to take the time to manage their own finances simply find the topic boring or uninteresting. If a financial advisor is personally analyzing client situations and making recommendations (rather than simply serving as a salesperson for other decision makers) it is his or her full-time job to stay abreast of investment products and markets and the techniques to manage clients’ overall financial needs.
A warning on sales literature – If the philosophy and ideas in financial sales literature fits your concerns and needs, a further investigation may be in order. As a general rule, your interest should be in reverse proportion to the amount of hype, exclamation marks, italics, bold print and grand proclamations in sales pieces. These are the mark of good salespeople but not necessarily of attentive, responsive financial advisors.