Did you know the financial advisory market is worth $6.3 billion in the UK alone?
Dealing with numbers every day isn’t everyone’s cup of tea. If we’re being honest, most of us don’t have the desire or patience to become financial experts. But it’s become increasingly essential for people to become financially responsible.
How can you ensure financial stability without learning financial management? Simple: By hiring a financial advisor to guide you.
As is with anything involving money, it’s normal to be skeptical about hiring one. After all, hiring an advisor gives them complete control of your financial future.
Nonetheless, we assure you that’s the best decision you can make for yourself and your loved ones. Curious why? Read on as we look at who a financial advisor is, the benefits of hiring one, and how to hire the best one.
Let’s get started!
Who Is a Financial Advisor?
A financial advisor is a professional who guides clients on their personal finances. They can help with everything from wealth management to crafting a savings plan. Here are a few things your financial planner can help you do:
- Assess your current financial situation and plan for the future
- Give financial advice when the unexpected happens
- Create savings accounts
- Develop a plan addressing retirement and estate tax
- Create investment accounts
- Develop an optimal investment portfolio
- Identify reliable financial vehicles like mortgages
Their services are so broad because the advisory field falls into various categories. Here are the main ones:
- Chartered Financial Analyst (CFA)
- Chartered Financial Planner (CFP)
- Chartered Financial Consultant (ChFC)
Advisors receive the titles mentioned above after sitting for and passing qualifying exams. So, you can rest assured they know how to handle your money.
When to Consider Hiring a Financial Planner
You can hire a financial planner at any stage in your life. In fact, hiring them as early as possible is a more responsible way to take care of your future.
However, most people wait for specific events to seek professional financial planning services. Here are situations when they hire financial planners:
- When they’re nearing retirement and would like to secure their future
- When they get married and want to start saving or investing as a couple
- When they get kids and would like to protect their future
- When they receive inheritances
- When they lose their loved ones and don’t know how to navigate the finances by themselves
- During estate planning
Again, you don’t have to wait for these events to care for your financial future. Look at planners from sites like https://consilium-ifa.co.uk/ as early as now.
Benefits of Hiring a Financial Advisor
Are you still on the fence about hiring a financial planner? If so, read on to understand the key benefits of hiring these professionals:
1. Expertise
What would you do if you need legal representation? You’d likely hire a lawyer to handle your legal needs, right?
The same is true for a financial planner and your personal finances. They have the expertise needed to ensure you get maximum benefits.
Your financial future is better when you hire a financial planner. You’ll also likely pick up some tips to broaden your financial knowledge.
2. Understand Your Situation
Most people don’t understand their financial standing. You may think you’re safe because you can afford your mortgage payments, only to get a rude awakening one day. There’s more to healthy personal finances than being able to afford your daily needs.
A financial advisor will assess your finances to give you an accurate picture of where you stand. Get ready to receive a detailed breakdown of your spending and savings from the past few years. This may seem unnecessary, but it’s the first step to achieving your financial goals.
3. Set Goals
If asked, most people would say their goals are saving for retirement and buying cars and homes. Don’t get us wrong – these are excellent financial goals, and any planner will tell you that. But they’re too general and may not be ideal for your situation.
A financial advisor will help set goals better suited to your financial situation. For some people, cash flow management may be an ideal goal, but saving for retirement is more suitable for others. A financial planner will divide your goals into the following categories:
- Short-term goals
- Medium-term goals
- Long-term goals
Cashflow management is a short-term goal, whereas saving for retirement is long-term. Your advisor will guide you on what to focus on, depending on your current situation.
4. Planning
Even with proper goal setting, you can’t achieve your dreams without adequate planning. A financial advisor will help you create a roadmap to achieving your goals.
They’ll recommend a contribution rate for your retirement funds if this is your focus. And they’ll follow up to ensure you keep the willpower to achieve your goals.
A financial planner will also continuously reassess your financial situation and plan. They’ll revise the roadmap to suit your changing situation and goals if need be.
5. Improves Return on Investments (ROI)
It takes experience and certifications to get the title of a financial advisor. These professionals have picked up knowledge a regular investor doesn’t have. They can help you create an optimal investment vehicle.
If you’re considering starting your investing journey, look for a reputable financial planner. They know how to assess opportunities to determine their feasibility using market data. This know-how is essential to maximizing your ROI on any particular investment.
6. Eliminates Self-Serving Bias
Self-serving bias is more common among investors than you may think. It’s the tendency to attribute positive outcomes to skills but negative ones to bad luck. This prevents investors from learning from their mistakes, so they repeat them.
Hiring a financial planner eliminates the bias since they record all wins and losses. They detect patterns that can help you make wiser trading decisions. You may find that trading at specific times or days of the week gives positive outcomes.
7. Takes Emotion Out of Investing
Let’s face it: Investing evokes emotion, even in the most avid investors. If you’re not careful, rash decisions can lead to drastic investment losses. This makes hiring a financial advisor a crucial step in your investing journey.
They’ll keep your eyes on your goals, even in the worst scenarios. Also, they’ll prevent you from chasing negligible short-term financial gains. Sticking to your plan will pay off in the long run.
8. Reduces Financial Stress
Financial management isn’t the most straightforward task. It requires you to have specific financial know-how and keep an eye on market trends. Doing this while holding down your job or business is mentally exhausting.
Luckily, you can eliminate financial-related stress by hiring an advisor. Knowing your finances are in professional hands does a lot for your peace of mind. You can focus on other vital matters in your life.
9. Coordination
Financial planners are used to working with other professionals. So, it’s easier for them to collaborate with tax accountants and other people in your employ.
Collaborating limits friction in your financial matters. It also keeps your team in check and ensures they’re all working toward your best interests.
10. Retirement Planning
When can I retire? Will I still afford to keep my living standards after retirement? How much do I need to save now to live comfortably after retiring?
These are some of the most common questions asked by people nearing their retirement age. Unfortunately, getting the answers to these questions by yourself can be daunting. It’s even harder when you don’t have basic financial planning knowledge.
That’s why it’s essential to hire a financial advisor. They’ll give the answers to these questions after assessing your earnings. This way, you don’t have to do away with anything after retirement.
11. Tax Saving Opportunities
Unfortunately, you can’t escape paying taxes forever. Let nobody deceive you into choosing opportunities under the guise of ‘tax-free’ gains.
Nevertheless, a financial planner can help you reduce tax costs by identifying loopholes you may not see. They can also help you file business taxes appropriately to avoid fines.
Financial planners receive extensive training in business law. So, you can put your tax issues behind you.
12. Financial Security
It’s impossible to tell what the future holds. You can’t be sure you’ll be healthy enough to care for your loved ones. Sad as it is, it’s essential to have a backup plan in case something bad happens.
A financial advisor can help you identify and secure the best plan. The market offers various insurance policies that appear appealing but aren’t.
Your advisor will help you find the right option depending on your goals. They can also create joint policies to protect various family members. This way, your loved ones don’t have to worry about the financial impacts of illnesses or death.
13. Monitoring
A financial advisor’s job doesn’t end with creating an optimal financial plan. Remember, your financial situation and needs will constantly change.
Just look at the effects of the pandemic – 1.3 million people lost their jobs. The only thing you can be sure about in this world is change.
Nobody can help you handle change better than a financial planner. They’ll readjust your financial goals and plan to suit your current situation. This way, you don’t have to forego too many things now for an unpromised tomorrow.
How Do You Choose the Right Financial Planner?
Odds are, you can’t wait to hire a financial advisor to handle your personal finances. Though we encourage enthusiasm, you shouldn’t rush the process.
Not when you have so much riding on hiring the best person. Here are crucial factors to consider to ensure you choose a suitable advisor.
Experience
Experience handling clients’ personal finances and investments is essential. Remember, you’ll be handing over your financial future to your chosen advisor. So, they must be qualified to meet your needs.
The ideal financial planner is one who’s experienced various economic cycles. They’ll have handled clients’ finances in times of fear and growth. Such advisors can limit or altogether remove emotion from financial planning.
Certification
Learning for most expert advisors doesn’t end with a university degree. They undergo extra training to make them better acquainted with financial planning.
So, check whether your chosen advisor is certified by the relevant body. If you’re looking for financial planning services, ensure they’re Certified Financial Planners (CFPs).
Fiduciary Standard
Planners are bound by fiduciary standards, requiring them to put clients’ interests first. They must disclose all conflicts of interest in writing before working with clients. But, as with other professionals, not all abide by this standard.
So, you’ll need to be careful when choosing your planner. Look into their background and read former clients’ reviews. That’ll prevent you from making a costly mistake.
Performance Reporting
Granted, assessing a planner’s reporting skills may be difficult before working with them. But you can identify red flags in your initial meeting.
Red flags include using complex terms and taking too long to get in touch with you and look over your finances. The right financial advisor will simplify their analysis throughout the planning process.
Fees
First things first: Quality financial planning services come at a fee, so be ready to pay. But there’s a difference between fair and exorbitant fees. Understand which category your chosen planner falls under before signing anything.
The right financial planner will break down their charges from the beginning. Some charge an hourly rate, others a percentage of your assets, and others both.
Get this information beforehand to help you shop for better deals. This isn’t to say that fees should be primary considerations. Consider them after all other factors to find the right balance between cost and quality.
Achieve Financial Freedom by Hiring a Financial Advisor
It’s normal to be skeptical about hiring a financial advisor if this is your first time doing so. The right advisor will help with everything from goal setting to retirement planning. They’ll help you achieve your financial dreams without sitting through boring planning classes.
Of course, these benefits hinge on hiring the right planner. So, consider factors like experience, certification, and reporting standards before hiring them. Do this, and watch as you achieve those seemingly unachievable goals.
For more finance tips and advice, be sure to check out more of our blog.
Alison Lurie is a farmer of words in the field of creativity. She is an experienced independent content writer with a demonstrated history of working in the writing and editing industry. She is a multi-niche content chef who loves cooking new things.