Managing investments can seem like a daunting task. A financial advisor can be beneficial because they can help manage your finances, make wise investment decisions, and plan for the future you desire.
Whether you have personal finance questions or concerns, want someone to guide you for the long haul, or are just curious about the services a financial advisor offers, you’re in the right place.
Common Financial Advisor Services
A financial advisor can provide valuable expertise in many different areas of your finances while also providing you with the encouragement you desire along the way. Here are seven services that a financial advisor can help you with:
1. Provide a holistic financial checkup
Financial advisors know the questions to ask you and what to look for. Their experience and expertise can allow them to disseminate many pieces of information such as your income, tax obligations, investment portfolio, liabilities and assets, etc., and create a snapshot of where you stand financially.
2. Create a financial roadmap
After gathering the data from your financial checkup, financial advisors can create a financial roadmap to get you started on your short, medium, and long-term financial goals. This roadmap can be fluid as you grow in your career and discover new opportunities.
3. Manage your investments
Perhaps one of the most important services a financial advisor offers is the ability to manage your investments. They know about the major financial institutions, vehicles for investing, and actual investments themselves. They can also advise you on alternative assets such as precious metals and real estate, as well as traditional stocks in the S&P 500.
4. Develop a debt repayment plan
Financial advisors can also help you develop and stick to a debt repayment plan, offering solutions you may not have been aware of.
5. Recommend products:
Some financial advisors specialize in selling products such as insurance, annuities, and professionally managed accounts.
6. Guide you in college, retirement, and estate planning
While you may have mastered budgeting and saving, many complex financial events require a bit of extra planning and support. A financial advisor can help you create college savings, a retirement plan, and estate needs that fit your needs and lifestyle.
7. Review and update your plan as needed
Many people find ongoing, continual support from a financial advisor beneficial. Most financial advisors stay with their clients for a long time, guiding them as life throws them both curve balls and new opportunities.
When You Should Consider Hiring a Financial Advisor
There’s no exact time or age to start working with a financial advisor, since their service offerings are vast. But generally, a major life event can often require extra financial support such as a marriage, divorce, spousal death, or the addition of a child.
Combining or separating finances can often cause a change in financial goals. And starting a family has major implications on your budget, insurance needs, savings, and estate planning.
A major career shift can also be a great time to seek out financial guidance. A financial advisor can help you review your new benefits packages and help you roll over an employer-sponsored IRA.
Approaching retirement, preparing an estate, receiving an inheritance, and selling a family business can also be great times to consider hiring a financial advisor. They can help you sort through tax implications, budget decisions, investment choices, and more during these unique times.
Six Pros of Working with a Financial
Financial advisors can help be a great resource for you and your family for both short and long periods. Here are six benefits of working with a financial advisor:
1. Receive objective, integrated financial advice
2. Increase your financial awareness
3. Free up your schedule
4. Understand tax implications
5. (Potentially) boost your portfolio
6. Gain insight into the future
1. Receive objective, integrated financial advice
When you’re too close to a situation or choice, it can be difficult to make objective, wise decisions. A financial advisor who knows your objective data, available resources and options, and your hopes and dreams, can provide you with a bird’s eye view perspective.
They can also show you your shortcomings and opportunities for improvement while giving you advice on which step to take next.
2. Increase your financial awareness
There may be areas of your finances that you’ve simply never addressed or been aware of. You might have a benefit at work such as an employee stock purchase plan that you’ve always ignored because you didn’t understand the benefits. Or you could be underinsured in an area of your life which could potentially derail your finances should an unexpected event happen.
By looking at your financials holistically, a financial advisor can increase your financial awareness and bring lesser-known risks and opportunities to the forefront of your mind.
3. Free up your schedule
You’ll initially invest a lot of time when you start working with a financial advisor. You’ll need to get to know one another, build relationships, share information, upload documents, sign agreements, etc.
But once the relationship is established and a financial plan has been drafted, working with a financial advisor can ultimately free up your schedule. Worrying and agonizing over financial decisions can waste precious time.
You’ll want to periodically review your portfolio and check in with your advisor, especially after a significant life event, but ultimately, you should be able to spend less time thinking about your finances once you’ve outsourced to a financial advisor.
4. Understand tax implications
Because of their financial expertise, financial advisors can be particularly valuable when it comes to the tax implications of your financial decisions. Most financial advisors are not certified public accountants (CPA), so they shouldn’t replace the tax professional in your life. However, they can advise you on:
- Tax-advantaged accounts
- Tax deductions
- Asset location
- Tax-loss harvesting
- Tax-minimization actions
- Tax-efficient withdrawal strategies
- And more!
Proper tax planning can create significant savings over the course of your career!
5. (Potentially) boost your portfolio
While it’s challenging to quantify exactly how much a financial advisor can boost your portfolio, some studies show financial advisors can boost returns because of their steady encouragement. When markets become volatile, advisors can help their clients remain calm and stay the course.
They can be a sounding board for investment ideas that you have or they can educate you on investments you’ve never considered before. Of course, nothing is ever guaranteed, and if a financial advisor does guarantee something, consider that a red flag.
6. Gain insight into the future
It can be challenging to imagine what retirement will look like for you in terms of inflation, spending, healthcare needs, etc. A financial advisor who has experience with helping individuals and families through pre-retirement and retirement can provide insight into what you need to plan for. They can also advise you on the many aspects of estate planning.
Cons of Working with a Financial Advisor
While it’s easy to see the many advantages a financial advisor has, we want to also bring up the potential disadvantages so you can make informed decisions:
1. They may have a conflict of interest
2. They could charge high fees
3. You could feel left in the dark
1. They may have a conflict of interest
If the financial advisor you hire is a non-fiduciary (meaning they don’t work in their client’s best interest), they could recommend products, insurance, and investments that don’t necessarily benefit you. While they may still offer financial advice, their conflict of interest as a salesperson earning commission can cloud their guidance.
They could charge high fees
Financial advisors are paid in different ways. Some are paid through commissions as we mentioned above while others are paid via a percentage of the assets they manage for you and others charge fixed fees.
Regardless of how they earn their income, their fees could end up eating up a large portion of your nest egg. As your account grows, the fees are often decreased.
3. You could feel left in the dark
While it’s beneficial to have someone else handling your finances for you, it can be a slippery slope. You could find yourself left in the dark about your money management and investments and have no idea what’s going on.
Trusting another person’s opinion and expertise can be a wise decision, but just make sure you still understand all of the decisions you’re making and that your financial advisor is being upfront.
How to Choose a Financial Advisor (And What Questions to Ask!)
Financial advisors are certainly not all the same. Their communication, client load, fee schedule, and qualifications can vary greatly. A few terms you’ll want to look for when choosing a financial advisor are:
Fiduciary: This means the financial advisor is putting their client’s interests first. A lot of financial advisors are fiduciaries, but not all. Fiduciary financial advisors are required to disclose conflicts of interest, are held to high standards, and can only recommend products that are beneficial for their clients.
Fee-only: These financial advisors are paid directly by you (the client) and not by any commissions. They may charge a percentage of assets under management (AUM), hourly, or on a retainer basis.
Certified Financial Planner (CFP): This certification requires rigorous requirements to be met including education, examination, experience, and ethics. CFPs can help you with retirement planning, investing, insurance, taxes, and insurance. CFPs also have a fiduciary duty.
Word of mouth is always a great way to find a reputable professional, especially when it comes to financial advisors. You can also find a financial advisor through the many different financial planning associations such as NAPFA (The National Association of Personal Financial Advisors) and XY Planning Network.
Questions to ask a potential financial advisor
Before signing a contract and entering into a professional relationship with a financial advisor, consider asking the following questions:
- Are you a fiduciary?
- How do you get paid?
- What services do you offer?
- What certifications do you have?
- How many years of experience do you have?
- How many clients do you have?
- Do you require an account minimum?
- What’s your investment philosophy?
- How often do you communicate with your clients?
These questions will help you determine if the financial advisor is a good fit for you and your finances.
Discover Investment Services and Retirement Solutions at LFCU
Financial advisors can offer objective, integrated financial advice, increase your financial knowledge, free up your time, keep your taxes above board, potentially boost your portfolio, and give you insight into your financial future.
At Lafayette Federal Credit Union, we offer our members the opportunity to grow their wealth through our investment services and retirement solutions. We offer a full array of brokerage services and products to help our members achieve a healthy financial life.
Our services include:
- Retirement Planning
- Education Planning
- Full-Service Professional Management
- Traditional IRAs, Roth IRAs & Rollover Options for 401(k)s, 403(b)s and TSPs
Insurance - Portfolio Products for Your Business
- Wealth Transfer & Estate Planning
In addition, our financial advisors will listen to your financial needs, provide impartial advice and be dependable and responsive. The process starts when you meet for a no-cost, no-obligation review of your current financial situation.
Appointments are available at any of our branch locations, via virtual appointment, or at a business office location of your choosing.
