Most people hire a plumber to help them with plumbing issues, a lawyer to help them with legal issues, and a doctor to help them with medical issues.
So, why don’t more people turn to a financial advisor for financial help?
I think it’s mainly because of two reasons and in this two part series we’re going to explore each of those reasons.
Most people don’t turn to a financial advisor for help because…
Most people don’t think they need a financial advisor.
Most people don’t actually know what a good financial advisor does for their clients.
In this post, I’ll talk about how a lot of people assume they don’t need a financial advisor and why that’s typically an incorrect assumption.
And in the next post, I’ll talk about what a good financial advisor actually does for their clients (hint: it’s MUCH more than just investment advice).
Who needs a financial advisor?
Many people assume (incorrectly) that if they don’t have as much money as Warren Buffett, they don’t need a financial advisor. While it’s true that your need for financial advice increases as your assets and income grows, that doesn’t mean you have to be a multi-millionaire to benefit from having a relationship with a financial advisor.
For example, below are just a few reasons you might consider hiring a financial advisor…
- You’d like to free up time to focus on what’s most important
- You feel overwhelmed with financial decisions
- You recently changed jobs or expect to make a career change
- You recently had a child (or two or three!)
- You want to make wise decisions about your money
- You own a business or would like to start one in the future
- You’re recently married, divorced, or widowed
- You were awarded a settlement or received an inheritance
There are dozens of other reasons you might consider the services of a financial advisor, but the above list should at least give you a starting point to think about when deciding whether or not it makes sense for you to talk to an advisor (for a more in depth discussion of some of these reasons, read this article).
Now, I’ll be the first to admit, not everyone needs ongoing financial planning and wealth management advice.
For example, if you have a strong interest in personal financial and investment topics, you have lots of time to research and read about recent trends and discoveries in the financial planning industry (like the ones found here, here, and here), and you’re able to stay disciplined, even during volatile economic and market conditions, then you might not need the services a financial advisor offers.
When it comes to our finances (and particularly our investments!), too many times we see the “speck” in someone else’s eye, while failing to see the “log” in our own eye!
But I’ll be honest, I haven’t met too many people (including financial advisors!) who meet all those criteria, especially the last one.
Everyone needs a financial plan
While it’s true that not everyone needs ongoing advice from a financial advisor, we all need a financial plan, a road map if you will, to help us reach our goals.
Imagine sitting in your car in New York City and wanting to travel to Atlanta, then to Denver, and finally to Los Angeles.
No big deal, right?
Now imagine trying to do that with no roadmap, no GPS, no cell phone, and no helpful gas station attendant to give you directions.
Unfortunately, this is how most people expect to reach their financial goals.
We all have goals in life and most of them intertwine with our finances.
Below are just a few examples…
- Help pay for your children’s college
- Save enough to start your own business
- Move to a different house/neighborhood
- Transition to a different career at some point
- Take a month long vacation to Hawaii
- Retirement (Or “rehirement” as I like to call it)
- Leave an inheritance to your children or grandchildren
- Help support your local church or another charity
These are great goals and some of them may be on your list, but if you don’t have a plan to reach them, odds are you won’t!
And if you do reach them, you probably won’t reach them as quickly or as easily as you could have if you’d had a plan to begin with.
Financial advisors can help you reach your goals
These goals are like destinations on a trip and a financial plan is like the GPS on your phone or car.
You don’t necessarily need a GPS to start the car and drive, but you’ll likely get to your destination faster and with a lot less stress if you have some sort of map or guidance along the way!
Fortunately, since most people don’t know how and/or don’t have the time to do this, you can hire a financial advisor to put together a personalized financial plan that will help you reach your goals.
Now, if you have less than $100-250,000 or so in net worth (i.e. what you own minus what you owe), then you probably just need a financial plan with regular “checkups” as your life circumstances change (i.e. get married, switch jobs, have a baby, receive an inheritance, etc.). Some financial advisors (like SageOak) offer hourly financial advice on an as-needed basis for people like this.
But if your net worth is over $250,000 and you’re the type of person who wants to free up time to focus on the things that are important to you in life, then you’ll likely benefit from an ongoing investment management or wealth management relationship with a financial advisor (you can learn more about SageOak’s ongoing service offerings here).
“Financial advisor is to _________”
Regardless of your situation, it’s helpful to have an established relationship with a financial advisor, so when a question arises that you need assistance with, you know who to call to give you honest, straightforward advice, relevant to your situation.
A financial advisor is analogous to a primary care physician. Almost everyone would benefit from having an ongoing relationship with a primary care physician to make sure their physical health stays in tip-top shape.
If that’s how things work with our physical health, why do we think it’s different with our financial health?
That wraps up part one of this two part series. Stay tuned for part two to learn more about the types of questions a good financial advisor helps their clients with on a regular basis.
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