Financial Planning future is an important task. It requires a complete understanding of our current financial situation, our financials goals and the best methods for achieving those goals. Sometimes, our goals are simple and require little planning, such as opening a savings account with a recurring deposit. Other times, our goals are more intricate, such as investing enough money to maintain our lifestyle into retirement. Depending on our level of understanding, planning for and achieving complex goals may require the services of a financial advisor.
Before choosing a financial advisor, we should evaluate our current financial situation. If we have significant debt, we may be better off seeking the services of credit counselor rather than a financial advisor. If we do not have much debt but we are not in a position to begin online stock trading or investing in other securities, we may not need a financial advisor just yet.
Advantages to Financial Advisors
- A financial advisor can view our financial big picture and evaluate it dispassionately. When we look at our savings, we see lots of hard work and a world of potential. It can be difficult to be objective and know where our money will work hardest for us. Without a background in finance, we may not be aware of some investment options or the risks.
- Financial advisors can maintain objectivity and help us clarify our financial goals. If we are planning for retirement, interested in stock trading, saving for college for our children, a financial advisor can balance our goals against the best methods of achieving them.
- A financial advisor can help us minimize our tax liability. He or she can tell us which tax liabilities are associated with withdrawing funds from investments, transferring funds between portfolios and advise us regarding any number of other financial decisions.
Disadvantages to Financial Advisors
- Financial advisors’ services cost money. These professionals do not provide free services, so we should consider their fees when deciding whether we need to hire one. Some financial advisors charge a flat annual rate and others may charge a percentage of the value of our portfolio.
- Not all financial advisors are qualified. Some people may call themselves financial advisors even though they do not have the skills or knowledge to back up their claims. We should check the credentials of any advisor we are considering hiring and verify their qualifications.