Is it Time for an Investment Advisor? Ask Yourself These 5 Questions First

If you want to avoid outliving your money, investing can be a great way to continue to grow your nest egg as you approach — and enter — your retirement years. And while there may be many robo-advisors out there that will do the investing for you, the one-on-one, hands-on approach and personal advice and guidance you get when working with a real-life financial advisor often times will offer better insight and clarity into the investment process.

According to a recent survey, financial advisors have become more important over the course of the past decade.¹ An increasing lifespan could be one of the many reasons people are more interested in professional help when it comes to effectively managing their money. The survey found that “consumer use of financial advisors has increased from 28 percent in 2010 to 40 percent in 2015,”¹ signifying a potential shift in attitude toward financial professionals. And while approximately 30 percent of households have a financial advisor, investors who are nearing retirement are more likely to hire one.² About 40 percent of individuals in their 60s have a financial advisor.²

From your needs and objectives to your risk tolerance and timeframe, there are a variety of factors your investment advisor will consider when designing your customized investment strategy. However, before you hire an investment advisor to help you grow your assets, it’s important to ask yourself these five key questions first.

1. How Complex Are My Finances?

While an investment advisor can be helpful in any situation, hiring one is usually more necessary when you have complex issues and questions to sort out. Things like inherited stock, investing the assets of your small business, or retirement distribution strategies require more in-depth insight. Even if you’re simply looking for straightforward advice that you can apply on your own, many financial advisors offer hourly planning advice that could save you some time and money in the long-run. Especially if you’re about to experience a transition — such as the birth of a child, a divorce, or retirement — teaming up with an investment advisor can help guide your decisions as you enter new financial territory.

2. How Much Can I Invest?

Before deciding to engage with an investment advisor it’s important to first consider how much money you have to invest. Some financial advisory firms require you to have a minimum amount of “assets under management” (also referred to as AUM) before they will take you on as a client. However, if you find an advisor you really want to work with, it is always worth it to reach out and talk to them, for even if their firm is not a good fit for you, they can often recommend another advisor for you to work with.

In some cases, a robo-advisor may be a better fit, at least until you accumulate enough resources to work with an investment advisor who aligns with your values, needs and goals. However, many financial advisory firms also now offer their own versions of robo-advisors, which are “digital investing platforms” for clients who are still accumulating assets and don’t yet meet their AUM minimums. Again, it’s worth it to contact the firm in question and find out what they recommend!

3. Do I Need Additional Financial Help?

When looking for someone who can help you invest your money, you can either hire someone who purely specializes in investment management, or you can find someone who offers comprehensive financial planning services. Because comprehensive financial planning involves investing, some may argue that finding a professional who provides this comprehensive style will give you more value for your money. However, if you’re more of a DIYer, it might be worthwhile to simply find someone who can manage your investments. When in doubt, interview a few professionals to gain a better understanding of their services.

4. What Are My Goals?

This may seem like an obvious question, but some people overlook this critical question and end up in an undesirable situation. For example, if you don’t have that much to invest and you’re just looking to try out investing and have no concrete plans to continue doing it, then you may want to try a robo-advisor first to get a feel for the market before making a more serious commitment. However, if you’re someone who is certain you want to invest for the long haul, then hiring an investment advisor can give you the accountability you need to achieve your investment objectives. It’s always a good idea to identify your expectations of the experience first before you get wrapped up in a long-term commitment.

5. How Can an Investment Advisor Benefit Me?

Recent Vanguard research¹ shows that your advisor not only adds peace of mind but also may add about 3 percentage points of value in net portfolio returns over time. An investment advisor is valuable in that they can educate you, as well as apply their knowledge, to help you make smarter investment decisions. At the end of the day, an investment advisor is an investment in itself.

1 Source: Francis M. Kinniry Jr., Colleen M. Jaconetti, Michael A. DiJoseph, and Yan Zilbering, 2014. Putting a value on your value: Quantifying Vanguard Advisor’s Alpha. Valley Forge, Pa.: The Vanguard Group.

Insights delivered right to your inbox | Sign up

WE’RE HERE TO HELP

Chesapeake Financial Advisors is a fee-only financial planning, investment advisory and tax planning firm with offices in Towson, Columbia, and Frederick, Maryland.

For disclaimer, please follow our link below:

https://www.peakeadvisors.com/site/wp-content/uploads/2019/05/Compliance-Social-Media-Disclaimer.pdf