What Does a Financial Advisor Do and Should I Get One? (2024)

FAQs

Do I really need a financial advisor? ›

Not everyone may require an advisor, but financial guidance is indispensable for navigating through the labyrinth of available information and complex decision-making that characterizes our financial landscapes today.

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Graduating college, getting married, expanding your family and starting a business are some major life events that might cause you to reevaluate your financial situation. A financial advisor can help you manage these life events while making sure you get or stay on track.

Very generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could also be higher, such as $500,000, $1 million or even more.

Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Bottom Line. On average, financial advisors charge between 0.59% and 1.18% of assets under management for their asset management. At 1%, an advisor's fee is well within the industry average. Whether that fee is too much or just right depends entirely on what you think of the advisor's services and performance.

Source: 2021 Fidelity Investor Insights Study. Furthermore, industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated.

While both offer guidance on investments, taxes and other financial matters, financial advisors generally focus on managing an individual's investment portfolios, while financial planners take a look at the entire financial picture and an individual's long-term goals.

The decision should not be based on age.

According to Cody Garrett, CFP, owner and financial planner at Measure Twice Financial, whether you should hire a financial advisor or not should not be based on your age but on which financial decisions you need help considering.

Just like working with a doctor or therapist, working with a financial advisor requires a level of transparency and candor that can be daunting. The more you share with your advisor, the better they'll be able to do their job and help you optimize your financial life.

How do I decide on a financial advisor? ›

Those who use financial advisors typically get higher returns and more integrated planning, including tax management, retirement planning and estate planning. Self-investors, on the other hand, save on advisor fees and get the self-satisfaction of learning about investing and making their own decisions.

Hiring a single advisor to manage an extensive investment portfolio may be unwise and restrictive since it can include a large number of undertakings.

Deciding to work with a financial advisor is a personal choice. There is no set litmus test for whether you need one. If you have investable assets, personal and financial goals, or questions about your finances, you may want to hire a financial advisor.

If you have little experience of dealing with finances or you're confused about making a decision, it may be helpful to get professional financial advice. A financial adviser can help with things like: planning for your retirement. investing or saving money.

If you already possess that understanding and feel confident in your financial plan and ability to manage your money throughout life's ups and downs, you may be fine on your own. Still, you might want to engage a financial advisor for a second opinion and to ensure you're on track to reach your goals.

By learning personal finance and investing basics, and remaining levelheaded and consistent in your money activities, you may be able to accumulate wealth without paying a financial advisor. If you're a disciplined spender, saver, planner, and investor, you may be competent enough to manage your own finances.

In a 2023 analysis by Morningstar, people who have fired a financial advisor gave researchers reasons including, “I felt like I was putting myself at more risk than I was comfortable with,” “the advisor was not providing us with the level of direction we were looking for” or “I thought he was looking at cookie-cutter ...