What Type Of Person Needs A Financial Advisor?

Over the past few years much has been written about whether financial advisors really add value to their clients or whether investors are better off handling their own financial needs. I’m probably biased but I believe that finding the right financial advisor can be very beneficial for many investors. Here are some thoughts on the type of person who might benefit from engaging the services of a financial advisor. (For more, see: Shopping for a Financial Advisor.)

Several years ago a busy, high-earning doctor with young children had contacted me about doing a review of his investment portfolio. My fee was not excessive yet he felt that rather than spending this amount he felt comfortable doing it himself. While he seemed intellectually capable from my conversation with him, you do have to wonder if this was the best use of his time given the long hours (and time away from his family) required by his job, not to mention the benefits of having the perspective of a professional second opinion. (For related reading, see: Do You Need a Financial Advisor?) 

Busy professionals, executives, and business owners could certainly benefit from engaging the services of competent financial professional to offer assistance ranging from a one-time financial review to ongoing investment and financial planning advice. As with the doctor above, these types of people might have the intellectual capacity to be their own financial advisor, but do they have the time required and the objectivity?

The approach of retirement is often a motivation for people to seek out the services of a financial advisor. Often these folks have been their own financial advisor over the years and have reached a point in life where they value an outside perspective and advice to ensure they are on track towards a comfortable retirement. (For more, see: How to Find the Financial Advisor of Your Dreams.)

Typical questions might include areas such as which accounts should be tapped first and how should investments be structured as retirement nears and once retirement begins? Investors at this stage of life often feel they might benefit from engaging a financial advisor as some of these issues can get complex, and also because there are few opportunities for a financial “do over” at this stage of their lives. (For more, see: Find the Right Financial Advisor.)

Those who are newly single due to a divorce or the death of a spouse might benefit from the advice of a financial advisor, especially if they were not ones who primarily dealt with financial matters during their marriage. Often this ends up being tilted towards women, but not always. In the case of women, however, they have the added issue of a generally longer life expectancy than men. (For related reading, see: How Financial Advisors Mistreat Women (and What Women Can Do About It.)

In the case of the death of a spouse there are potential issues such as life insurance, retirement plan accounts, and the loss of that spouse’s income to be concerned with. Will the assets leftover be enough to sustain the surviving spouse’s lifestyle? (For more, see: Paying Your Investment Advisor: Fees or Commissions.)

In the case of a divorce, it can make sense for one or both spouses to engage the services of a financial advisor during the divorce process to help determine a fair split of the couple’s assets. For example keeping the house if there will not be adequate cash flow to pay the mortgage and maintain the house might not be a good deal for either spouse. (For related reading, see: How to Get The Most out of Your Financial Advisor.)

There is no easy or pat answer to the question of what type of person or profession needs to hire a financial advisor. Rather it revolves around a person’s situation and their personality. For example a busy and successful attorney might seem like the perfect candidate to hire a financial advisor. Before making this judgment we need to take a closer look at this attorney. Is he or she comfortable taking the advice of other professionals? Are they comfortable with paying for this advice? Do they enjoy investing and are they good at it? If you are looking for a financial advisor check out this guide to finding one from the National Association of Personal Financial Advisors (NAPFA), the largest organization of fee-only financial advisors in the country. (For related reading, see: Why the Best Financial Advisor Might Be You.)