How broadening your trust network makes you a better investor and offers greater peace of mind.
Whether planning on your own, attending to your entire family’s affairs or operating your own business day to day, the financial responsibilities requiring your attention may feel like they are a full time job. That may not be much of a stretch as budgeting, paying bills, saving and investing all require a tremendous amount of discipline and this is before you even get to tax and estate planning. From the mundane to the transformative, the idea of having an objective partner or sounding board is comforting.
In some instances, consulting with your spouse, a close friend or even a co-worker will suffice, but there are many decisions where enlisting the services of a financial/advisor is a wise choice. But how do we know it’s worth engaging that expert? You rarely here people question the merits of visiting their doctor to address a health issue or a skilled tradesmen to tackle an important project at home, but there is often hesitation or second guessing when it comes time to seek real financial advice.
Trust and confidence are the key to any great relationship. The inner circles we cultivate are those few people that we would trust with just about anything, a privilege earned over the course of time. Maybe we are fortunate enough to have real experts in our lives, whether that be health, career, relationships, or finance, but in a world drowning in puffery and self-adulation, everywhere we turn someone has some “wisdom to impart.” Sometimes these “experts” are exactly that, experts – other times, not so much. If your sister is a board-certified pediatrician and you need help with a toddler’s ear infection you are on the right track. If your neighbor, the landscaper, is constantly talking to you about “can’t lose” stock ideas, run!
So how do I go about finding an expert in the field of finance? Or better said, who should you trust with your financial future? The short answer is – someone who has relevant professional experience and that has your best interests at the forefront. Maybe you are fortunate to have someone in your inner circle who fits the bill, if so that’s great, but for most of us, we need to seek out professional help elsewhere.
Have you ever wondered if you should pay off your mortgage early? What changes should you make to your investment strategy given the state of the economy? Should you be contributing money to a Roth 401k or the more standard tax-deferred 401k? Should I be gifting now or waiting until later when I am entirely confident I won’t outlive my assets? Do any of these sound familiar? I can see your nodding your head that you may not feel confident enough to answer them on your own.
We all want to identify the ten-bagger investment, but much like winning the Powerball those are long odds. Sometimes the value you get from your advisor comes from their ability to help you avoid money mistakes both large and small. The best version of this relationship is a “two-way street” where the advisor is not just responding to your inquiries but making proactive suggestions or anticipating your future needs.
Expertise and Knowledge: An experienced financial planner is trained in various aspects of personal finance, including investments, retirement planning, tax strategies, estate planning, insurance and more. Planners can provide valuable insights and recommendations based on their expertise and a client’s specific situation. Ideally, they have been through a number of market cycles and have an understanding of both markets and investor behavior,
Customized Financial Planning: A financial advisor can create a personalized financial plan that considers your specific goals, risk tolerance, financial circumstances, and time horizon. You are unique, it’s perfect acceptable to expect a solution that is not cookie cutter. A tailored approach can help you identify goals both large and small which will inform decisions along the way to help you work toward your financial objectives.
Investment Management: Most individuals & families need help managing their investments, financial advisors can offer guidance on asset allocation, diversification, and selecting appropriate investment products. Advisors also provide ongoing portfolio rebalancing and reallocating as conditions in the world financial markets and economies change. Investment portfolios need to be dressed for the right season just like we do.
Risk Management: Financial advisors can help you assess and manage countless financial risks. Risks that can impact a plan, range from investment risk, early death, disability, inflation, excessive spending/withdrawals, and everything in between.
Retirement Planning: Planning for retirement is a complex and critical task. Financial advisors can assist in creating retirement income strategies, estimating retirement expenses, and optimizing Social Security and other retirement benefits.
Tax Efficiency: Advisors can help you implement tax-efficient strategies to minimize your tax liability, such as taking advantage of tax-advantaged accounts, tax loss harvesting, leveraging municipal bonds and strategically realizing losses to minimize taxable capital gains.
Emotional Support: During turbulent financial times, a financial advisor can offer emotional support and help you stay focused on your long-term financial goals, whether uncertain times, helping to prevent impulsive decisions and short-term thinking.
Estate Planning: Having a thoughtful plan for your affairs when you are gone can create streamline winding down your affairs reduce costs and possible family friction when it comes to your assets and wishes. Your advisor should be able to lay out different options for you to feel your values outlive you.
Education and Empowerment: A good financial advisor not only provides guidance but also educates clients about financial matters, helping them become more financially literate.
The importance of a financial advisor depends on your individual circumstances and needs. If you're uncertain about your financial situation or have complex financial goals, consulting with a qualified financial advisor can be a wise decision. It's essential to research potential advisors, consider their credentials and fees, and ensure they are a good fit for your specific financial situation and objectives. Ideally, a financial advisor will act as a fiduciary. A fiduciary is a legal term that essentially means that the professional is obligated to act for a client’s benefit, not their own. Starting with someone who is a CERTIFIED FINANCIAL PLANNER or CFP® for short, is a great place to start.