Feeling Financially Overwhelmed? You Might Need a Financial Advisor

In This Article

We need to talk. It’s probably not what you think, but it is personal. So personal, in fact, 51% of Americans would rather not talk about it with friends or family.

What could it possibly be? It’s your finances.

Let’s face it. No one likes talking about their financial situation. Whether you are a millionaire or a working-class hero, discussing your finances with your friends and family, let alone an advisor, may feel taboo.

But a financial advisor could be the perfect person to talk to about your money! It’s important to know when to ask for help about your investment strategy, but let’s build a foundation first.

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What is a financial advisor?

A financial advisor is more than someone who advises investors. An advisor helps you create a financial plan to achieve your goals, whether that be financial independence or retirement planning for luxurious golden years.

It’s easy to wonder, Do I need a financial advisor? I’m not rich. Financial advice isn’t only for the wealthy. Their plans can help with:

• Budgeting
• Saving
• Investing
• Insurance strategies
• Tax tips
• Financial literacy

The plan created alongside them can help you build wealth, achieve your financial goals, and avoid any predictable risks.

Be sure to look for a financial advisor that is also a fiduciary. Fiduciaries are required to act in your best interest. A financial advisor that is not a fiduciary (and they are out there!) might make decisions based on their own profit.

How are financial advisors paid?

You might be wondering how financial advisors get paid to do all this. Let’s take a look.

• Fee-only financial advisors: Fee-only advisors have a set rate. The rate can be based annually or hourly, depending on the work you have them doing. Another type of fee-only advisor involves a flat fee, such as charging a set percentage of the assets they are managing.
• Commission-based financial advisors: These advisors make their money by taking a commission from every investment they sell or open. Three examples of investments are insurance packages, retirement accounts, or mutual funds—but there are many others. Keep in mind that these advisors are commonly critiqued. There’s an incentive to complete transactions in order to earn more of a commission rather than benefit your financial future.
• Fee-based financial advisors: Note that this type is based on the advisor’s fee, not only the fee as mentioned before. These advisors have a set fee, but they also earn a percentage of your investments in exchange for managing them

Helping plan your financial future

A financial advisor is important no matter how much knowledge you hold in the financial industry. Advisors have specific training to help you with your specific needs.

Some personalities find it hard to plan ahead. It can be difficult to think of what you want in retirement when you are just starting out in your career. A financial advisor’s expertise comes from working with a variety of people at different life stages. They have been able to see people’s financial futures play out. Plus, it’s exciting to know what your future is and how you can make it come to fruition.

Allowing you to worry less about your money

Finances can be overwhelming—so why not hire a money manager? With a set plan in place, you can know exactly what to do with your money without needing to research for days. You know what your money is doing and why you have that plan in place. There’s a bigger picture, so you don’t have to worry about every little thing.

Serving as an impartial third-party opinion

Money is personal, so financial decisions can be emotionally taxing. A financial advisor can be an unbiased, outside source of information during these decisions. This allows you to see financial decisions from both sides. Your advisor might also save you from taking a huge financial risk based on how you feel in that moment. Similarly, if you and your partner can’t agree on a financial decision, an advisor can provide their opinion based on the facts and be a good mediator.

Now you know why to hire a financial advisor, but you still don’t know when. Let’s dive into those reasons now.

Secondary income

Earning an additional income is a move that many financial advisors encourage. Advisor Eric Brotman thinks it might be a good idea to start that side hustle—especially during these unusual times—saying that “you’re going to want the money.”

Maybe you finally got around to starting your own business or you own a rental property. A financial advisor can assist you in handling multiple money streams, especially if these are new investing avenues for you. Even if you do have experience with additional income, a licensed financial professional can help you to minimize your margin for error, resulting in optimal success.

Finding the perfect part-time job or extra gig does not have to be rocket science. Take one of your passions and turn it into a lucrative side business. If you want to keep your hobbies separate from your professions, see what services are in demand in your area.

Major life changes

Even if you feel like your life has become sort of stagnant during the pandemic, that doesn’t mean your life is without change. Many of us are struggling to keep our jobs, our investments have become uncertain, or we have an ever-increasing pile of bills, among any number of other sudden changes.

As we struggle to make ends meet, it may seem like the wrong move to spend more money on expert assistance, especially if it feels more important to spend money on bills, finding a job, or home supplies. In reality, taking a step back and asking for help now could save you more than you realize.

You can hire an advisor to help you get started or to serve as an investment mentor for the long haul. In any uncertain climate, having some reassurance and guidance is key. Many financial advisors use a method called behavioral coaching to keep your worries in check and help you plan for what lies ahead.

Feeling overwhelmed

Now, not everyone is a money guru or has an expansive amount of monetary knowledge. Some of us may not know what actions to take, where to spend the money, or how to pay off debts. It can be easy to get in over your head. This can be a great opportunity to press the reset button and either create a new strategy on your own or bring in some outside help.

For instance, a financial planner can help you organize your revenue and set a goal-oriented timeline that works best for you. They can help you sort through the clutter, determine your priorities, and collaborate with you on a roadmap to help ease some of the pressure.

We get it: It can be easy to be distrusting when someone tries to tell you how to spend your money. Your financial lives feel private. We get it! Plus, you may have some economic expertise in your wealth of knowledge. That is great, but another set of eyes—professional ones—may be all you need to set sail in the right direction.

Preparing for the next chapter

Maybe you are helping a child prepare for college or your retirement is around the corner. Your financial advisor wants to do what they can to help you make the best decisions for your future. Even situations like family inheritance can be daunting. Having an advisor to help clear the fog around investment assets can be a good thing.

Make sure that you hire the right person for your situation. The qualities of a retirement advisor may not be the same as someone helping you or your child pursue further education.

Why hire a financial advisor to help with your retirement? As you enter the next stage of your life, the previous one comes to a close. Ensuring that all of your previous debts, assets, long-term care needs, and various accounts are in order is an overwhelming task for any one person.

Similarly, when prepping for continuing education, many of the same circumstances can hold true. Attending school typically invites debt acclamation and other expenses. No matter how organized you are, some things are bound to fall through the cracks. Better to be safe than sorry.

So you’ve decided you want to take the next step and find a financial advisor! You’ve answered the why and when but now it’s time to answer the who. There are a number of different certifications and exams that advisors can take. The main types of financial advisors include the following.

Investment advisor

Registered investment advisors (RIAs) manage portfolios and offer a strategy based on your investment portfolio and financial goals. They can help you understand how investing builds your wealth, and they know which investment accounts to recommend.

Certified financial planner

Certified financial planners (CFP) take a look at the bigger picture, and can easily handle complexity. They consider your retirement savings, emergency savings, monthly budget, lifestyle aspirations, and insurance needs to create a plan and offer advice specific to you.

Wealth manager

Wealth managers typically work with the high-net-worth population. They serve the same holistic purpose as CFPs, but they also specialize in estate planning, accounting, and philanthropic decisions.

Robo-advisor

Robo-advisors are becoming more popular in making it easier for people to invest—especially with financial apps. They create automated portfolio recommendations for you based on your responses to questions about risk tolerance, financial goals, and timeline. If you want moderate to minimal human intervention, this is the route to take.

Having certified, professional advice does not mean you are incapable of handling your own money. If anything, rest assured that seeking the help you need is a sign that you acknowledge the benefits of licensed aides guiding you toward your ultimate goals.

It doesn’t matter if you are seeking financial independence, have experienced a sudden life change, are overwhelmed by a mountain of debt, or are planning the next chapter of your life. No matter how comfortable or uncomfortable you are with managing your own finances, there is no harm in talking to someone to make sure you are on the right path.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.