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Who Should Work With a Financial Advisor?
April 24, 2017

A financial advisor can help you in various ways and many people, regardless of their job or income, can benefit from working with one. An advisor helps keep you focused on your goals, which can make it easier for you to accomplish them. Furthermore, an advisor can answer your most important financial questions and help you stay on track as a family.

Who Can Work with an Advisor?

While there are many advantages to working with an advisor, many people don’t. Only around 52% of pre-retirees and 44% of retirees consult a financial advisor and that number drops among younger generations. The reason why? For many (around 27%), they don’t think they have enough savings or investments to necessitate help. (For more, see: Can You Afford a Financial Advisor?)

However, this is a common misunderstanding. In reality many people, from young professionals to growing families and business owners, can benefit from working with an advisor. Many advisors will tell you that it’s never too early to start saving and planning for the future. Yet, one of the most common investor pitfalls is not saving early enough.

The Three Qualities of a Great Investor

First, it’s essential to understand what makes a great candidate for working with an advisor. Three characteristics that help are:

  • Motivation to save
  • A focus on goals
  • An ability to save

While you need to have established some savings in order to grow it and pursue your goals, you don’t have to be a millionaire to work with an advisor. However, you do need to start somewhere so you can invest, start a retirement account or embark on some other strategy.

The Costs

Next, it’s important to understand how advisors are paid. There are three main ways an advisor may charge: (For more, see: 5 Things to Ask Before Hiring a Financial Advisor.)

  1. Commission. For products like insurance or annuities, an advisor receives a commission based on the policy you purchase. In this instance, you aren’t directly paying an advisor any fees. Another example of a commission product would be a mutual fund with a sales charge.
     
  2. A percentage of assets under management. Some advisors charge a percentage of your assets that they manage in a portfolio. For example, if you have $100,000 of investable assets, an advisor may charge 1% annually (totaling $1,000 of that $100,000).
     
  3. A flat or hourly rate. Lastly, some advisors may offer the ability to pay a flat or hourly rate or per-project fee. If you aren’t ready to invest, you and your advisor may decide that it’s appropriate for you to pay a flat rate for a financial plan or advice. These rates can vary, depending on the advisor.

Some advisors offer a combination of or all three of these payment options. This can make it easier for younger professionals, families and Millennials to get a head start with their finances and work with an advisor.

If you don’t have significant assets to invest, you can start smaller with financial planning strategies designed to help you save and eliminate debt. As you save more, you can explore your investing and retirement planning opportunities.

The Next Steps

While there isn’t necessarily a set dollar amount recommended to start working with an advisor, the decision ultimately depends on you and how much you’d value the advice of a professional. As with any professional that you would look to hire, you’ll want to interview him/her to make sure that you like and trust him/her. It’s important to again stress that you don’t need to be a millionaire to start working towards financial independence. You do, however, need to have a motivation to save, an idea of the goals you want to achieve and some ability to save.

(For more from this author, see: 3 Reasons Why You Need a Financial Advisor.)

 

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.  NPC does not render legal advice. 


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