- Written By Thomas J. Brock, CFA®, CPA
Thomas J. Brock, CFA®, CPA
Investment Management and Finance Professional
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.Read More
- Edited BySavannah Hanson
Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.Read More
- Published: January 7, 2022
- This page features 2 Cited Research Articles
- Edited By
Personal financial management entails everything from handling your day-to-day finances and saving excess funds to investing for the future. It sounds simple, but the process is actually quite complex and time-consuming, with several interdependent practices and considerations. These include budgeting, banking, optimizing insurance coverages, minimizing tax burdens, planning for retirement, managing investments and structuring appropriate legal frameworks.
For many people, simply maintaining a budget and managing a handful of bank and investment accounts can be difficult. Factor in the complexities associated with the other ideas above and the financial management process can be downright daunting. This is where a skilled financial advisor can be highly beneficial.
Read on to learn about the seven situations when you may need a financial advisor most.
You’ve Always Managed Your Own Investments
If you have a sound understanding of financial markets and your risk-return profile, there’s nothing wrong with managing your own investments. That said, it’s not a bad idea to vet your investment strategy with an unbiased financial advisor. The exercise could reveal significant enhancement opportunities. At a minimum, it could affirm your plan and give you peace of mind.
Remember to always work with a fiduciary, which is a type of advisor that is legally and ethically committed to always act in his or her client’s best interests. This standard of service and care differentiates fiduciaries from other, potentially less scrupulous, financial advisors.
You’re Frustrated With Your Current Financial Advisor
If you have an advisor but the service you’re receiving is lackluster, it could be time to shop around for a more suitable arrangement. You’ve worked hard to accumulate your money, and you shouldn’t base any decisions regarding how to manage it on the advice of someone that gives you pause.
There are many competent and empathetic advisors out there. If you’re ready for a change, do a little research and interview a few fiduciary advisors. To facilitate your search, you can visit the CFP Board — a non-profit organization that sets and enforces standards for the widely respected Certified Financial Planner (CFP) certification. Unlike some financial advisors, all CFPs are held to a strict standard of fiduciary duty.
You’ve Recently Inherited a Significant Amount of Money
For some, receiving an inheritance is an incredible blessing. However, it can be challenging, especially if you lack financial planning and investing experience. The last thing anyone wants to do is squander the money received from a loved one. Therefore, it’s important to lay out a plan. Depending on the size of the inheritance, it may make sense to work with a financial advisor.
You’re in the Process of a Major Life Change
If you’re undergoing a divorce, for example, untangling the finances between you and your spouse can be very complicated. A financial advisor can help you make sense of the details and chart a sensible course for the future. Practical, unbiased advice can be invaluable, especially if you’re not used to managing household finances.
A divorce isn’t the only situation where advisory support may be prudent. Any significant change or high-dollar matter could necessitate professional assistance. Examples include selling a business, entertaining a lump-sum offer on a pension or planning for your child’s college education.
You’re Relatively Young and Want to Build Wealth
If you’re a ways off from retirement and desire to build wealth, but you don’t want to directly manage your investments, working with a financial advisor is the way to go. You will have to pay for the service, but, given your long investment horizon, the returns you’ll earn are likely to far exceed the cost.
That said, be sure to work with an advisor that charges an economical fee. Usually, this entails a “fee-only arrangement” levied as a percentage of assets under management. Sometimes, a piecemeal charge may be sensible for discrete project work. Be skeptical of any commission-based arrangements.
At the end of the day, an excellent advisor can help you establish a holistic plan that reflects consideration for your current financial position and future retirement needs. The advisor can also help you implement an effective, hands-off investment strategy that reflects your tolerance for risk — which is influenced by your time horizon, liquidity needs, tax position and legal situation.
You’re Retiring Soon
While connecting with a financial advisor can be a smart mid-career move, it is often essential as you approach retirement. Given the myriad of uncertainties and legislative complexities on the horizon, very few people have the skills to effectively plan for their non-working years. An advisor can help make sense of things and optimize decisions regarding your investments, Social Security elections and retirement account distributions.
You Have People That Depend on You
Regardless of your age and retirement horizon, if you have dependents, a financial advisor can be very helpful. An experienced professional can help you ensure they are taken care of in the event something unfortunate happens to you. This usually entails assessing your risk exposures, structuring an optimal insurance plan and implementing a long-term investment strategy. Sometimes, it involves estate planning.
2 Cited Research Articles
Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.
- Certified Financial Planner Board of Standards, Inc. (n.d.). Find a CFP Professional. Retrieved from https://www.letsmakeaplan.org/
- Investor.gov. (n.d.). Risk and Return. Retrieved from https://www.investor.gov/additional-resources/information/youth/teachers-classroom-resources/risk-and-return