Menu #15: Should you team up with a financial advisor or go solo?

STATS STACK 🥞

19 million people are expected to file for an extension with the IRS this year to prevent their bank accounts from being raided, with the agency automatically granting a six-month extension. Fun fact: Mark Cuban sent the IRS $288 million yesterday and is proud to pay his share. (Source: CNBC).

92% of listings within the zone of totality for the April 7th total solar eclipse had been booked, highlighting significant demand for accommodations on that date. Meanwhile, only around 30% of homes in areas surrounding the eclipse's path were occupied on a typical Sunday night in April, indicating comparatively lower interest in those locations.

29% is the reduced probability of a recession within the next year according to The Wall Street Journal's latest quarterly survey, marking the lowest likelihood since April 2022. Economists anticipate growth to bottom out at an inflation-adjusted 1.4% in the third quarter, with just 10% expecting negative growth over the next 12 months. (Source: WSJ).

57 percent of Americans reported not having a financial representative in 2022, while 35 percent worked with a financial advisor, marking a slight decrease in the share of Americans seeking financial advice compared to the previous year.

DEEP DISH 🍕

Should you team up with a financial advisor or go solo?

Let's unpack a crucial question in your personal finance journey: should you team up with a financial advisor or manage your finances solo? This isn't a cookie-cutter decision; it's deeply personal and varies based on your life stage, financial aspirations, and your comfort with handling money matters.

What financial advisors do

“Financial advisor” is a broad term that spans various experts in the finance field. There are investment advisors who focus on building your investment portfolio. Then you have financial planners who offer a more comprehensive package, covering retirement, insurance, and estate planning. And, of course, there are CPAs, the go-to for savvy tax planning.

Remember, though, that not every advisor has the same commitment to your interests. Registered investment advisors, for example, are legally obligated to prioritize your needs, but others, like some brokers, might be more focused on their commissions than your financial wellbeing.

When to consider a financial advisor

If you're time-strapped or unsure: When investing feels like uncharted territory or if life's just too hectic, an advisor can be your financial compass.

Major life financial decisions: Be it buying a house, selling a business, or funding your child’s education, advisors can be invaluable during these pivotal moments.

Managing a windfall: Inheriting a significant amount can be daunting. An advisor can help you invest wisely and manage potential tax implications.

Navigating the retirement maze: Retirement isn't just about ending your work life; it's a complex financial phase that requires a well-thought-out plan.

Emotion-driven investing: If market fluctuations make you nervous, an advisor can provide a steady hand, helping you avoid impulsive decisions.

Choosing the right financial advisor

Finding the right financial advisor is crucial. Here’s a roadmap to help you make an informed decision:

1. Clarify your financial goals and needs: Before you start looking for the right advisor, reflect on what you're hoping to get out of that relationship. Are you looking for general investment advice, specific help with retirement planning, or comprehensive financial management? Your goals will determine the type of advisor you need.

2. Learn about the different types of advisors:

Financial advisors wear many hats and come with various titles: investment advisors, brokers, certified financial planners, financial coaches, portfolio managers. Here's a quick guide to help you differentiate between these diverse types of financial professionals:

Fiduciary vs. non-fiduciary: Fiduciaries are legally bound to act in your best interests, while non-fiduciaries aren't held to this standard.

Fee-only vs. commission-based: Fee-only advisors are compensated solely through client fees, while commission-based advisors may earn money from selling products (e.g., insurance, certain investments).

Certifications and specializations: Look for credentials like Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or Certified Public Accountant (CPA) which indicate a level of expertise and commitment to ethical standards.

3. Consider the advisor's approach and philosophy:

Investment philosophy: Does the advisor's investment approach align with your risk tolerance and investment goals?

Financial planning style: Are they proactive and holistic in their approach, considering all aspects of your financial life?

4. Evaluate accessibility and communication style:

Accessibility: How often will you meet with your advisor? What’s their policy on responding to your queries?

Communication: Ensure their communication style matches your preferences – whether it’s in-person meetings, phone calls, or digital communication.

5. Understand the fee structure:

Transparent pricing: Look for clear, straightforward fee structures.Some advisors may charge a fixed- percentage of your assets under management (e.g., 1% of assets) while others may charge a flat fee or an hourly rate. Avoid advisors with complex or hidden fee arrangements.

Compare costs: Assess how the advisor's fees compare to industry standards and ensure they're within your budget.

6. Check references and reviews:

Client testimonials: Ask for references or read online reviews to gauge the advisor's reputation and client satisfaction.

Background checks: Use resources like FINRA's BrokerCheck to verify credentials and check for any past disciplinary actions.

7. Meet potential advisors:

Initial consultations: Schedule meetings or calls with potential advisors to discuss your financial goals and gauge if there’s a good personal and financial fit.

Ask questions: Don't shy away from asking tough questions about their experience, approach, and how they’ve handled situations similar to yours.

Final thoughts
Choosing whether to work with a financial advisor is a significant step in your financial journey. It's about finding that sweet spot where your financial objectives meet your personal comfort with managing money. Whether you choose professional guidance or to go it alone, the key is to make informed, confident decisions about your financial future. It's not just about wealth accumulation; it's about achieving peace of mind for you and your loved ones. Here's to making empowered money moves!

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