How much money should you have before using a financial advisor
Financial planning can be a daunting task for many, and hiring a financial advisor is a great way to get started. However, it can be challenging to determine how much money you should have before hiring one. This article will dive into the factors to consider when deciding how much money you should have before hiring a financial advisor.
It is important to note that numerous financial advisors serve diverse clients. These clients can range from individuals with only a few hundred dollars to invest to those with millions. Additionally, some advisors offer a subscription-based model, which is particularly beneficial for younger professionals seeking guidance from an advisor but prefers to avoid the commitment of a traditional fee structure and ongoing relationship.
In this article, we will cover:
- How much money does someone need in order to work with a financial advisor
- Common situations that cause people to want to work with a financial advisor
- Are financial advisors too expensive
- What factors to consider when thinking about working with a financial advisor
- Why you should or shouldn’t hire a financial advisor
How much money do you need in order to work with a financial advisor?
The amount of money you need to work with a financial advisor can vary greatly depending on the type of advisor: traditional financial advisors and private wealth financial advisors.
Misconception: “I need to have a lot of money to work with a financial advisor.”
Truth: it's not necessary to have a large sum of money to work with an advisor or planner.
Fee-only Financial Planning
What is it? The advisor charges a flat fee for their services and does not receive any commissions or kickbacks from selling financial products. This can be beneficial for clients who want to ensure that their advisor is acting in their best interest and not pushing products for the sake of earning a commission.
Another similar pricing model that is gaining popularity is subscription-based financial advising. This model allows clients to pay a monthly or annual fee for ongoing access to an advisor's services. The benefit of this model is that clients can get ongoing advice and support without having to pay a large upfront fee. It can also be more affordable for those who only need occasional advice.
Flat fee and hourly rate models are also common in financial advising. With a flat fee model, the advisor charges a set amount for specific services, such as creating a financial plan or reviewing investment portfolios. An hourly rate model charges the client based on the amount of time spent working on their account. Both of these models can provide transparency in pricing and allow clients to know exactly what they are paying for.
Ultimately, when choosing a financial advisor, it's important to consider not just their pricing model but also their qualifications, experience, and approach to investing.
Traditional Financial Advisors
Traditional financial advisors typically require a minimum investment amount, which usually ranges from $50,000 to $500,000 or more. The exact amount can depend on the advisor's fee structure and services offered. Learn more about pricing models for financial advisors here.
Private Wealth Financial Advisors
On the other hand, private wealth financial advisors typically work with high-net-worth individuals who have at least $1 million or more in investable assets. These advisors often provide more specialized and customized services.
It is worth noting that there are also financial advisors who offer subscription-based models or hourly rates, which can be more accessible to individuals with smaller investment amounts. These advisors may charge a flat fee or hourly rate for their services rather than a percentage of assets under management.
When do people most often work with a financial advisor?
Some of the most common reasons people choose to work with a financial include:
- Getting married
- Starting a family
- Starting a business
- Selling a business
- Planning for retirement
- Have recently gone through a significant life change like a divorce, separation, or financial windfall
However, it’s important to note that many people choose to work with a financial advisor when they are feeling stressed or overwhelmed by volatility and are struggling with investing on their own, going through a career change, have questions about stock compensation, need help to pay off student loans or debt, or are feeling stressed about supporting their families.
When people face the situations we talked about earlier, it can sometimes cause them to have money problems. That's why they might want to work with a financial advisor. A financial advisor can help you feel more secure and protected in many areas of your life. With AdvisorFinder, you can feel sure about finding the right advisor to help you.
Can I afford to work with a financial advisor?
One of the most common reasons why people choose not to work with a financial advisor is because they think they can’t afford to work with one. In fact, 50% of Americans think financial advisors cost more than they do!
Can you afford to work with a financial advisor? Yes!
What should you consider when choosing a financial advisor?
Now that you have an understanding of what the true cost of working with a financial advisor is and feel confident about when you should turn to a financial advisor for help, let’s dive into some things you should know when choosing a financial advisor.
Don’t always hire your friend's financial advisor
You and your best friend may have different lifestyles - for example, you might have a family and unique financial responsibilities that come with having a family, while your friend is single and doesn't have as many obligations. This means that you might have different financial needs and goals. So, even though your friend's financial advisor works well for them, it might not be the best choice for you. If you do decide to meet with your friend's advisor, be sure to explain your specific financial goals, how much risk you're willing to take, and your lifestyle. It's important to be careful about taking recommendations from friends, as they may have biases and not be the best judge for your situation.
Work with an advisor whose strategy is aligned with yours
It's really important to choose an advisor who is a good fit for you so that you can achieve your financial goals and feel more confident about your money. You should find an advisor who can relate to your risk tolerance, work style, needs, and communication style. Remember that the AdvisorFinder Marketplace allows you to find an advisor with a strategy that aligns with yours.
What questions should you ask a financial advisor?
- What are my all-in costs?
- How often should I expect us to meet?
- How often do you communicate with clients?
- Will we update my financial plan?
- Here’s a list of more questions to ask your financial advisor.
Don't be afraid to ask you advisor for clarification on what's most important to you. There is no such thing as a dumb question. Your advisor is there to help you.
Should you work with a financial advisor?
Working with a financial advisor is your call, but we want to give you the information in order for you to make a more informed decision.
Remember the following:
- Financial advisors are not as expensive as you think
- Working with a financial advisor can be beneficial if you don’t feel confident managing your or your family's financial future
- Financial advisors can help you pay off debt, negotiate a salary, save on taxes, plan for retirement, plan for educational expenses, and much more
- Working with a financial advisor “can add up to, or even exceed, 3% in net returns” per year over time, according to Vanguard research
How to find a financial advisor?
That’s what AdvisorFinder is here for. The AdvisorFinder marketplace makes it easy to find an advisor based on your unique situation in life and lets you schedule a meeting with as many advisors as you want to meet.
Best of all? It’s totally free, and you’ll find financial advisors from any firm.
.png)
.png)
