When it comes to paying for a financial advisor, there are pros and cons to consider.
On one hand, paying an advisor can help you reach your financial goals quicker and easier than if you were to go at it alone.
However, on the other hand, paying an advisor can eat into your savings over time, and finding a trustworthy financial planner can be difficult.
In this article, we will outline when it is worth paying for a financial advisor (different from a financial planner) and when it may not make sense to do so.
What is a financial advisor?
A financial advisor is a professional who helps people plan for their long-term financial security. Financial advisors can help you with things like setting up a budget, saving for retirement, and investing your money.
There are different types of financial advisors, but they all have one goal: to help you reach your financial goals. The cost of a financial advisor depends on the type of services you need and the type of financial advisor you hire.
Hourly fees for financial planning services can range from $100 to $300. Asset-based fees, which are a percentage of the assets you have under management, can range from 0.50% to over 2%. The average fee for asset-based fees is around 1%.
When paying a financial advisor makes sense
There are a few situations when paying for a financial advisor can make sense.
If you have a complex financial situation, if you’re going through a major life change, or if you’re not good with money, paying for a financial advisor can help you get your finances in order.
They can help you figure out how to save money, how to invest your money, and how to reach your long-term financial goals.
A financial advisor can also help you stay on track when it comes to your finances. If you have a hard time sticking to a budget or making financial decisions, paying for a financial advisor can help you stay on track.
A good financial advisor’s primary goal is to help you reach your financial goals, so they can keep you accountable and help you make better financial decisions.
Typically, when starting out with a financial advisor, you’ll have an initial meeting to discuss your goals and what you want to achieve. From there, the financial advisor will create a financial plan for you and help you execute that plan.
If you’re paying for a financial advisor, you should expect to receive a comprehensive financial plan that’s tailored to your specific situation.
The financial advisor should also be available to help you make changes to your plan as your life changes.
When paying for a financial advisor may not make sense
There are also a few situations when paying for a financial advisor may not make sense. For example, there are products like Savology that provide a detailed financial plan for free. You can see our full review here.
If you have a simple financial situation, if you’re good with money, or if you’re comfortable making your own financial decisions, paying for a financial advisor may not be necessary.
You may also want to avoid paying for a financial advisor if you’re not comfortable with the fees they charge. Some financial advisors charge hourly rates, while others charge asset-based fees.
These fees can add up over time, so it’s important to make sure you’re comfortable with the fees before hiring a financial advisor. One percent may not seem like a lot, but it can add up to a lot of money over time. For example, if you have $100,000 invested with a financial advisor who charges a one percent asset-based fee, you would be paying $1000 per year in fees.
Another reason you may want to avoid paying for a financial advisor is if you’re not sure you can trust them. There have been cases of financial advisors selling their clients investments that they don’t need or charging hidden fees.
Not all financial advisors are created equal. There are different types of financial advisors, and not all of them are regulated by the government. For example, there are fiduciary financial advisors and non-fiduciary financial advisors. Fiduciary financial advisors are required by law to act in their clients’ best interests. Non-fiduciary financial advisors are not required by law to act in their clients’ best interests.
How to find a trustworthy financial advisor
If you’re considering paying for a financial advisor, it’s important to find one that you can trust.
Here are a few things to look for when choosing a financial advisor:
- Check if the financial advisor is a fiduciary. This means that they are legally obligated to act in your best interests.
- Look for a financial advisor with experience. Ideally, you want to find an advisor who has been working with clients for at least five years.
- Make sure the financial advisor is transparent about their fees. They should be able to tell you how they’re paid and how much they charge.
- Ask the financial advisor for references. You should be able to speak to some of their past or current clients to get a sense of their experience.
- Check the financial advisor’s credentials. They should have at least a bachelor’s degree and be certified by a professional organization, such as the Certified Financial Planner Board of Standards.
- Find out how often you’ll be meeting with the financial advisor. You should expect to have at least an annual review, but you may want to meet more often if you’re working towards a specific financial goal.
Bottom Line
Paying for a financial advisor can make sense in some situations, but it’s important to do your research to make sure you’re getting what you pay for. You may want to avoid paying for a financial advisor if you have a simple financial situation, if you’re good with money, or if you’re comfortable making your own financial decisions.
If you’re considering paying for a financial advisor, it’s important to find one that you can trust by looking for a fiduciary, an experienced advisor with transparent fees, and good credentials. You should also find out how often you’ll be meeting with the financial advisor to make sure you’re getting what you pay for. In general, paying for a financial advisor can make sense in some situations, but it’s important to do your research before making a decision.
