“Should I work with a financial advisor or do it myself?”
This may feel like a difficult decision.
You can also try to figure everything out yourself. There are an overwhelming number of financial books, podcasts, blogs, and YouTube channels.
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But it takes time, patience, and energy, all of which are already in short supply for many of us.
Alternatively, you can hire a financial advisor to work things out for you.
But this option has its own hurdles. It can be expensive (I think the average cost of a financial plan is around $3,500). To be honest, horror stories don’t inspire confidence.
The world of financial advice is complex and can seem daunting from the outside.
Luckily I have some insight into this world.
A few years ago I financial education platform. Since then, I have helped hundreds of people, many of them women, take control of their financial lives.
Over the years, I have spent hundreds of hours interviewing, recruiting and working with financial professionals to bring our flagship organization together. program to master money.
I learned a lot about the “behind the scenes” of the financial advice industry and what a financial advisor can and cannot do for you.
Today I want to share three things to keep in mind before hiring a financial advisor.
1. Financial advisors cannot solve all money problems.
Historically, many financial advisors focused on selling financial products (insurance policies, investments, etc.).
More recently, the focus has been on helping clients achieve their financial goals. But even so, this historical context means that there are certain things that many advisors are typically untrained to deal with.
For example, if you’re bad at saving money, your financial advisor may not be the best person to ask.
Learning to save often requires a change in behavior, which many advisors are ill-equipped to help with. Many advisors like to help clients who already have savings figure out what to do with that money.
There are many aspects of financial success that aren’t really part of your job. Helping you overcome investment anxiety, alleviating financial conflicts in your marriage, or advising you on how to increase your income may offer limited support.
Therefore, before hiring an advisor, it’s a good idea to clarify what specifically you need help with and whether a financial advisor is the right person to help you.
2. Your financial success is your responsibility, not theirs.
Some see hiring a professional as an “easy way out” of needing to keep track of their own financial situation. They close their eyes and put the expert in the driver’s seat.
In effect, they are giving up responsibility for their own economic lives.
In some cases, this can end in disaster (like the horror stories you hear about scams and scams).
It can also result in “less than ideal” results, though not catastrophically. Perhaps cheaper investment options or different tax regimes could have saved thousands of dollars.
This is not just due to “rotten apples”. Even “good” has its limits.
Even the best financial experts aren’t familiar with every product or strategy, are subject to human error, and are still steeped in their own biases.
Therefore, there is no substitute for being actively involved in the financial decisions being made about your money, even if you are working with a financial professional.
3. The more you understand your finances, the more value you get from your financial advisor.
You may be thinking: “I want financial advice because I don’t know what I’m doing. Are you saying you need to know what I’m doing to get financial advice?” ?!”
But if you know nothing about finance, how do you know if the advice given is useful? How do you know what questions to ask?
I have repeatedly seen that many students gain far more from their relationships with financial professionals after first gaining a solid foundational understanding of their own finances.
You can go faster if you don’t ask them to explain all the jargon. You’ll be able to ask the right questions and understand the pros and cons of different options.
Active participation in decision making makes for a more collaborative relationship.
Listen to What The Finance. In this bonus her episode, Melissa Brown talks about the most common scams out there and her top cyber security tips to keep your money safe in the online world. Post continues below.
So, here are three questions worth asking yourself before you talk to your financial advisor.
1. Do I understand the basics of finance enough to understand the advice they are giving me and ask the right questions to see if the advice is right for me?
2. If not, can we just blindly accept and follow what they say?
3. Am I clear about what I need to help you with, what goals you want me to achieve and how? Have you lost it?
If you answered “no” to all three questions, it may be beneficial to do some homework before working with your financial advisor.
Paridhi Jain is the founder of SkilledSmart, a financial education platform that helps adults learn to save, manage and invest money. For more money tips, get our free e-book. “5 money mistakes cost thousands of dollars” See course details on our website. master the money.