Now, not all of us have the time to study how money works. From interest, loans, taxes, most of us can only afford to have a surface level understanding on what the best way is to reach our financial goals. We make impulsive decisions, which may lead to hard earned money being wasted and not being used to its full usefulness.
If only someone knew what they were doing, and wanted you to make more money at that.
What is a financial advisor?
A financial advisor is someone who examines and manages all your financial decisions. This includes retirement, investing, saving, or allocating money for personal use. They tailor a financial plan to achieve a goal that you want to achieve by helping reduce taxes and maximizing returns.
Why should I trust someone with my money?
There’s the old saying, “You have to spend money to make money,” and a financial advisor is no exception. While spending a sizable amount of money for someone to give you advice is foolish, a financial advisor’s best interest is to ensure that your financial goals are being met. Typically on top of flat costs for plans and services, financial advisors make a small percentage (anywhere from 1 to 2 percent) of the money you have allowed them to manage. This incentive benefits both parties, so you can make the assumption that the financial advisor is truly doing everything they can so you meet your financial goals.
How much do they cost?
While a financial advisor may have varying costs depending on how they operate, financial advisors can cost about $5,000 a year if using a flat rate. While this may seem costly, the moment you break even, having a financial advisor becomes “profitable.”
How much am I making?
Remember, financial advisors aren’t just giving you money. They are making the best use of the money you already have. This means that saving money technically isn’t profit, but it isn’t a loss. In addition, a financial advisor probably isn’t going to make you a millionaire overnight working a minimum wage job. The impact a financial advisor has may seem small, but can certainly add up over time. It is estimated that investors that have professional financial advice can average 3% more on their returns in the long term.
What if I’m already struggling to make ends meet?
That is not to say a financial advisor is for everyone, they are large financial commitments. A financial advisor can only do so much, so if you don’t have any money for them to work with, obviously paying for a financial advisor is inadvisable.
Final Remarks:
There are many people who have extensive knowledge on how to effectively manage their finances, some more than others, but it takes a lot of computation to understand how it all works. Having someone else give their perspective allows you to focus on the “working” part while your advisor does the “thinking and planning” part.
Works Cited
Fontinelle, Amy. “What Does a Financial Advisor Do?” Investopedia, June 2023, www.investopedia.com/articles/personal-finance/050815/what-do-financial-advisers-do.asp.
Lake, Rebecca. “Is It Worth Paying a Financial Advisor 1%?” SmartAsset, June 2023, https://smartasset.com/financial-advisor/is-it-worth-paying-a-financial-advisor.
O’Shea, Arielle, and Andrea Coombes. “How Much Does a Financial Advisor Cost?” NerdWallet, July 2023, www.nerdwallet.com/article/investing/how-much-does-a-financial-advisor-cost.
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