Rhiannon D’Averc talks to the experts to find answers to your most pressing financial questions. This month – is a financial advisor worth it, when should you get one, and how can they impact your life?

Who needs a financial advisor?

Reading this article, you may be wondering if it’s even for you. Are you the kind of person who needs a financial advisor?

The need for a financial advisor is not limited to a specific demographic or income level. Anyone who wishes to optimise their financial situation can benefit from their services – and who doesn’t want to have more money and worry less about it?

Whether you are just starting your career, planning for retirement, dealing with a significant life event, or seeking to grow your wealth, a financial advisor can help you devise a tailored strategy to reach your objectives.

If you feel like thinking or talking about money is scary, then you’re definitely in need of a helping hand. “That thing that sounds scary isn’t once someone helps you navigate it,” says Christopher Pfanstiel at Axias Wealth Advisors. “I think there are a million professions that do that for other people. [They] take you from worried to at peace or comfortable. The financial coach is just the person that’s the translator and then the fixer, the communicator for those matters that are financial.”

Different people may have different needs from their advisors, as Michael Lecours from fpPathfinder points out. “Financial advisors fit into a number of different roles to help clients and individuals. You have some people that are confused. They don’t know the answers to the questions. They don’t even know the questions to ask. And so they need somebody to ask who’s going help guide them through that process.

“And then there are others where they are so distracted with everything going on in life that they just don’t want to bother. Like, ‘I know the questions, I can do the math, but I don’t have time to do it and double check it and make sure it’s right’. So, in that case, they’re looking to delegate.

“[Or] the clients are scared and they need an advisor to help them not be scared or to help them give some confidence when the markets are scary.”  

When should you get a financial advisor?

The ideal time to engage a financial advisor varies, but the experts I spoke to agreed that it’s something you should look into sooner rather than later. Any of the following could prompt you to seek advice:

  • Significant life events: If you experience a major life change such as marriage, divorce, birth of a child, or inheritance, a financial advisor can guide you through the necessary adjustments to your financial plan.
  • Long-term goals: When you start considering long-term goals like buying a home, funding your children’s education, or planning for retirement, a financial advisor can help create a roadmap to achieve them.
  • Complex financial situations: If your financial situation becomes more complicated due to increased income, business ownership, or sudden wealth, a financial advisor can provide expertise to manage and grow your wealth effectively.

Of course, just because you know you need a financial advisor, doesn’t mean they will be willing to see you – especially if you are in your early twenties, which is, realistically, when you will need to start saving for your old age.

“The real answer is people should do things right from the very beginning of their career. First, get a job and enrol in their benefit program,” says Pfanstiel. “The first dollar in the 401k should go into the right allocation. But it’s so difficult to find someone who’s going to say, yeah, I have time to have that conversation for what equates to be five cents an hour.”

Lecours agrees, but sees some hope in the future. “If you are relatively new out of college, you’re young, you’ve got college debt. You’re entering the workforce, so you’re trying to figure out what your benefits are. All these new rules. You’ve left your parents. You’re on your own. You’re buying a house. You’re getting married. You’re changing jobs. You’ve got a lot of major life events.

“But, typically, advisors don’t want to talk to you unless you’ve got a couple hundred thousand dollars saved up. And so we’re seeing the industry start to change a bit more where there’s subscription models out there, where an advisor can be hired for a hundred or two hundred dollars a month. And a client can be working with them in that aspect. They don’t need to have the big pot of money.

“So, I think that that’s opening up a lot of new ways for everybody that is interested to have access to an advisor.”

What can a financial advisor do for you?

One of the huge benefits of having a financial advisor is that they are the ones who get to do all of the research – and you can just reap the rewards of their knowledge. “When you switch over [to a financial advisor], you start looking under rocks that you never even knew were there,” says Chad Holmes at Formula Wealth. “We can take advantage of loopholes and tax code. And we can take advantage of things that, honestly, unless you’re just researching, constantly – if you don’t want to do that… hire somebody who knows how to do that.”

Knowing that everything is taken care of for you is also a huge deal – and a weight off the mind. “When you have an advisor like that, a trusted partner, you can go through life with, in my opinion, more peace of mind,” explains Holmes. “Knowing that all of your blind spots are being analysed and reviewed by somebody else with a different perspective who specializes in those blind spots.”

Don’t underestimate the effect an advisor can have on your mental health, when it comes to taking stress off your plate. “If money is a major source of stress and you’re not feeling it, then in some way, shape or form, advisors can lessen the strain on whatever is in your life that drives you to your therapist or your prescription or your psychologist,” says Pfanstiel. “Money can really tear somebody apart. So, while I can’t quantify it, I can say that there’s probably billions plus just in the US on the table that advisors are at least capable of saving clients in mental health costs.” T

hose costs can also be high in the UK, where therapy is not always available on the NHS. Many of us would agree that we’d be willing to pay more in order to have happier lives, so getting peace of mind AND saving money is a huge win.  

What is the measurable financial impact of a financial advisor?

The benefit of having someone on your side for all your financial planning needs can be measured in percentages and figures – in fact, it’s a pretty well-known standard in the industry. A good financial advisor should be able to save you (or make you better off by) as much as 3%. That’s not something to be sniffed at, and when combined with the earlier benefits, it’s a no-brainer.

“3% doesn’t sound like much, especially when most advisors are charging 1%,” Holmes says. “But if you compound a few hundred thousand dollars or a million dollars by an extra 2% a year for two or three decades – the end result, it’s an incredible investment to work with somebody.”

Pfanstiel has seen a huge impact gained by some of his clients who took his advice at the right time. “Unfortunate as it is, we’ve had clients who we’ve yelled at to get wills or get life insurance or things like that, actually end up passing away. The seven figure difference of what’s left behind for that family and how feasible it is to get their crap together… that seven figure difference is a monstrous transformation.”

Where does this two or three percent boost come from? “It comes from things like when the markets are really down and you’re scared and if you’re left to your own devices, you’re going to go sell out of everything and move all the cash,” explains Lecours. “Instead of doing that, you talk to your advisor and the advisor puts this in perspective and you say, I won’t. I’m going to stay the course – and then all of sudden the markets start to slowly recover, when ordinarily you would sell out and miss out on all those gains.”  

Having a financial advisor on your side could make a huge difference to your life, especially if you start as early as possible – at least a couple of years before any anticipated life events. The sooner you start, the greater that two percent can add up to – and the bigger difference you will see when, one day, you hopefully reach retirement and get to enjoy the spoils.  

Join us next month for another insightful look at the world of finance. You can find Rhiannon on Twitter @rhiannondaverc – send her your pressing questions to get them answered here in our pages!

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