Overview: Do You Need A Financial Advisor? 


Even the savviest of consumer investors may need a financial advisor to help guard them against the future insecurity of running out of money during the retirement years.

If you are wondering, “Do I need a financial advisor, and am I saving enough money for retirement?” then this brief overview may be of help to you by answering a few key questions to pinpoint your financial gaps.

Kiplinger Publications, a financial magazine company, provides its readers with a quiz to help consumers determine their need for a financial planner. The investor walks through 10 scenarios to answer the question “do you need a financial advisor?”

These scenarios cover everything from whether a financial planner can assist you in tracking your monthly expenses to reaching your financial goals.

However, there are other questions and scenarios you need to consider while clarifying whether your situation requires a financial advisor. The following is a list of questions you should consider before contacting a financial planner and paying a $100 to $500 hourly consultation fee.

Once you hire a financial advisor, you can expect to pay an additional percentage of your assets if they manage your money as well, according to Kiplinger.

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Should I Get a Financial Advisor? Do I Receive Tax Refunds?

do i need a financial advisor

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If you normally receive a tax refund every year, you may need assistance in making sure you are paying the correct amount in taxes, as well as have an objective third-party to take a closer look at what you owe. The reality is that the money you receive from the IRS as a tax refund is actually money the government owes you—unless the refund is due to a tax credit.

U.S. News suggests that you make sure you know the tax laws each year to avoid loaning a large amount to the government interest-free. A financial advisor will keep updated on all of the new tax laws and how they will affect your income, portfolio, and investments.

According to U.S. News, if you are no longer receiving the average $2,800 in tax refund each year, you will have an estimated $214 more in your bank account each month that you can use to contribute to other things like retirement funds, paying off debt, and adding more to a Health Savings Account (HSA).

Do you need a financial advisor to take a look at the following and help you find ways to increase your tax deductions and use that extra money in your bank account throughout the year?

  • Retirement account contributions will reduce your total taxable income, allowing your money to grow tax-free.
  • HSA contributions can roll over if you do not use these funds for medical expenses. Similar to your retirement account contributions, the money can grow tax-free.
  • Claiming your home office as a tax deduction will allow you to write-off a certain percentage of your utilities and rent if you use the space exclusively for your business.
  • Business tax deductions can be taken if you are self-employed, whether you are working at home or have a brick-and-mortar store.
  • Combining business travel with vacation may also allow you to write-off certain luxuries like a percentage of your mileage and hotel costs.
  • Mileage cost deductions are available to employees that are not reimbursed for travel to branch offices or for business deliveries.
  • Charitable deductions are easily overlooked and include weekly tithing to your religious organization, clothing, and food donations to the local food pantry or Goodwill, and cash given to charity organizations.
  • Military service members serving in the reserves can deduct their lodging and halve the cost of their food when traveling more than 100 miles from home.

The American Opportunity Tax Credit and the Lifetime Learning Credit are two deductions you should consider if you are paying college expenses for either yourself or your child. Do you need a financial advisor to help find more tax write-offs? Be sure to speak to a financial advisor about additional tax deductions.

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Do I Need a Financial Planner? Am I Paying Too Much in Investment Fees?

You may not be aware of the hidden fees charged on your investments. Even employee benefits, like 401(K)s may include a charge for the investments. According to USA Today, small fees can still add up over time. The news site reports that if you were to invest $100,000 with a 5 percent return and 2 percent annual fees, you would receive an estimated $80,000 less than if the annual fee was 1 percent with the same investment.

You may be asking, “Do I need a financial planner to unearth these hidden fees?” Of course not, but having a professional that understands the industry and market can make life easier when it comes to lower fees and higher gains.

The following is a list of more hidden fees you may not be aware of in your investments:

  • Advisory fees can add up, especially if the advisor is receiving a commission for recommending specific investments. If there is a case of conflict of interests, your advisor may not have your best interest at heart.
  • Back-end and front-end load costs on investments can place a dent on the amount of your investment. A front-end load is charged upfront, typically taken from your initial investment. The back-end load is the commission fee charged when you sell your mutual fund share, usually as a percentage of the value of the share—it starts out high and decreases the longer you hold the shares. These fees can really add up if your investments are frequently traded.
  • Annual expense ratios may seem like nothing to worry about at 1.5 percent or 2 percent per year. However, consider the 1.5 percent fee if your investment is $100,000. The annual fee will be $1,500. At 2 percent, you will be paying $2,000 each year.
  • Complex fee structures can become confusing with hidden fees and commissions. Investments like exchange traded funds (ETFs) and mutual funds are sold by companies and a financial advisor can assist you with choosing one with lower fees.

Should I Use a Financial Advisor? Am I Saving Enough Money for Retirement?

Planning for retirement seems to be a last-minute thought to many people. Although you may have a 401(K) from your employer, retiring may still be 20 to 40 years away. This mindset is detrimental when you turn 55 and are faced with the reality of retirement, suddenly in the near future. Whether you decide to retire at age 62, 65, or 70, a financial planner can help you draw up a roadmap—the earlier you do this, the better. Read the statistics below while considering, “Should I have a financial advisor to help me get on track?”

GoBankingRates conducted three consumer surveys with each survey focused on a particular generational group: Millennials (ages 18 to 34), Generation X (ages 35 to 54), and Baby Boomers as well as older seniors (age 55 and beyond). The following are the troubling results of the surveys after they were analyzed by experts:

  • 1 in 3 Americans have saved zero for retirement for various reasons.
  • 23 percent of the country’s citizens have less than $10,000 in retirement accounts.
  • 10 percent of Americans have saved between $10,000 and $49,000 for retirement.
  • Only 13 percent of Americans have allowed their retirement money to grow to $300,000 or more.
  • 63 percent of women and 52 percent of men have less than $10,000 in retirement savings.
  • Only 9 percent of women have $300,000 or more in their retirement accounts while almost double the amount of men (16 percent) have more than $300,000.
  • 48.2 percent of the Generation X population have saved more than $10,000.
  • 26.7 percent of the Generation X population have saved more than $100,000.
  • 22.4 percent of the Baby Boomer and beyond generations have saved $300,000 or more.
  • 42 percent of Millennials do not have a retirement savings account.

Although not quite half of Millennials have retirement accounts started, those who do seem to be on track for future retirement, according to the surveys. Whether you are a Millennial, Generation Xer, or Baby Boomer, the answer to your question, “Should I have a financial advisor now?” is yes. A financial advisor can help you begin making the right investments and assessing your risks to help you get as close to your financial goals as possible.

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Do I Need a Financial Advisor? What Happens to My Money in a Down Market, and Am I Prepared?

When the market takes a downward dive—and predictably, it will—a financial planner can help you manage a contingency plan. The downfall for many investors is not preparing for a recession or a bubble bust, such as the dot-com bubble of 2000 or the housing bubble in 2008, according to U.S. News. You will want to protect your earnings and investments in the event of another recession.

should i get a financial advisor

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Your financial advisor will walk you through each step, but it is your choice if you choose to follow their advice in a down market.

The financial planner may suggest consistently investing a set amount into your 401(K) despite the market because doing so means you will buy a smaller amount of shares when the price is too high and a larger amount of shares when the prices drop.

They may also recommend, depending on your specific circumstances, enacting stop-losses, increasing the amount in your savings accounts, making long-term financial and investment plans, and creating a six-month emergency cash account. Do you need a financial advisor to do these on your own? Probably not, but due to their complexity and tax laws, you may want to consider a financial planner’s services.

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Do I Need a Financial Advisor? More Key Questions

Financial advisors can help you reach your financial goals, but they will not help you create a budget and track your expenses like software programs or apps, or predict the future market like economists can.

The following is a list of questions you need to ask yourself, and carefully consider the answers before hiring a financial advisor:

  • Do I need a financial advisor to get me to my financial goals, whether that is to retire with more than $300,000 or fund a college savings account?
  • Should I get a financial advisor to improve my portfolio?
  • Do I need a financial planner to look at my whole financial picture and not just a particular investment or annuity?
  • Should I use a financial advisor to life plan, so that I can leave my job and travel abroad or start a small business?
  • Should I have a financial advisor to set up trusts for my family members so I can help them with health care costs and other expenses?
  • Do I need a financial advisor to set up investment accounts for family members using my funds?
  • Should I get a financial advisor to explain specific tax laws to me before I buy or sell investments, or if I am consistently receiving a tax refund each year?
  • Do I need a financial planner to review hidden fees, complex fee structures, and insurances with me on a regular basis to make sure I am not paying out too much?
  • Should I use a financial advisor to create a college savings account for my children so that it earns the amount needed to fund their educational expenses?

A financial advisor can help with each one of these scenarios. The answer to your question, “Should I get a financial advisor?” is probably yes if you have any financial goals. The next question we’ll answer for you is, “I need a financial advisor, so how do I find one?”



I Need a Financial Advisor—Where to Find Certified Financial Advisors

Do you need a financial advisor that is certified? The Certified Financial Planner Board of Standards (CFP) certifies and holds CFPs accountable for their actions. Each CFP takes an exam and can attend conferences for continuing education. You can use the CFP Board’s website to search for financial planners in your area. The “I need a financial advisor search” is easy using the digital tool by simply entering your city, state, or zip code.

Brokerage firms can also help you locate financial advisors within their organization; just make sure that you understand the different ways that the financial advisor will be paid. When you tell the brokerage firm “I need a financial advisor,” ask them to explain their complex fee structure and clarify if your advisor is going to be recommending products based on a kick-back.

Whether you are gearing up for retirement or funding your children’s college tuition, a financial advisor can help you. Take your time to answer the question of “Should I use a financial advisor?” and consider the immense opportunities you can afford when you reach your financial goals.

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