The Benefits Of A Financial Adviser
Everyone should have a financial plan, regardless of age, income or net worth. It will help plan for the future and meet goals. Having a skilled financial adviser can be vital in helping create a financial plan. Some people like to do it themselves, but for those who do not have the time, desire or knowledge, finding a competent and trustworthy adviser could be crucial to your future financial success.
Here is what a good financial adviser provides:
• Expertise. A good financial planner will be able to go through a holistic view of your finances. They will learn your goals, current financial situation, and be able to objectively offer advice that provides clear, concrete steps to reach your goals. The best financial planners can act as your financial quarterback, working with other specialists such as your accountant and estate attorney to see how you can avoid unnecessary taxes, how to properly set up your estate plan, and the types and amounts of insurance you need. They can help in determining how much to save, how to invest it, how much to take out and what types of accounts to set up from retirement to college accounts. There are many certifications that planners can get, such as the Certified Financial Planner (CFP), Chartered Financial Analyst (CFA) and Chartered Financial Consultant (ChFC) designations that require extensive training and testing.
• Objectivity. A famous adage states, “Where your treasure is, there your heart will be also.” A financial plan also is an emotional plan. Emotions can drive financial decisions that may or may not be sound. Getting objective advice from an adviser takes out the emotions and sentiment, helping you make unbiased decisions. How an adviser gets paid can impact the type of advice. If an adviser gets a commission, he or she may be biased toward a certain product. Fee-only advisers get compensated from the client at an hourly or fixed fee, or a per centage of assets under management. Clearly understand how an adviser gets paid so you are comfortable with the adviser’s financial philosophy.
• Discipline. Picking investments and creating a portfolio are daunting tasks, especially in today’s volatile market. The biggest challenge investors face is not the market, but themselves. Studies show that the average investor tends to buy high and sell low. From 1992 to 2011, the average investor only gained 2.4 percent, whereas the S&P 500 gained 7.7 percent and bonds 6.1 percent. Why the large discrepancy? The average investor did not stay invested during the entire time period. They moved in when stocks were doing well and moved out when the market bottomed out. A good financial adviser will help you stay disciplined in sticking to your portfolio in the good and bad times. Warren Buffett stated in the 2008 downturn: “Be fearful when others are greedy and greedy when others are fearful.” It takes discipline to follow his wise advice!
A financial plan is a lifelong one that requires expertise, objectivity and discipline. If you do not have the time, desire or knowledge to do it, this is where a good financial adviser can come in.