Families typically reach out to financial advisors when they experience a major financial milestone. This often coincides with significant life events, including changing jobs, selling a business, receiving an inheritance, and changing family dynamics. It may also be relevant upon reaching retirement. However, many people, especially those who spent most of their career handling their own finances, aren’t sure if they actually need a financial advisor. They may struggle with the decision to outsource certain money decisions to a professional.
In my experience, there are four main reasons why someone should decide to hire a financial advisor. Hopefully this framework will help families in their decision-making process as they contemplate whether to hire a financial professional to help.
1) You don’t know what you’re doing: Many smart and successful people don’t make good financial planning or investing decisions. It has nothing to do with intellect. It’s simply because studying the field of personal finance is not how they spend their time. Without being immersed in a certain area, one inevitably misses a lot of planning opportunities.
Getting your financial advice from friends and family is generally a good indication that you don’t know what you are doing. This is similar to going to the gym and selecting your exercise routine based on what you see other people doing. What others do should not impact your approach. You need a strategy that caters to your circumstances and goals. Playing copycat to what your friends on the golf course are doing is ill-advised.
2) You’re too busy: There is a finite amount of time in the day. Not every task can realistically be done by yourself. Delegating certain tasks frees up your time, allowing you to spend it on other, more enjoyable or productive, areas.
Personally, I’m a huge outsourcer. Most things that don’t fall under the categories of my job, family, and hobbies get outsourced. For example, I don’t enjoy doing work around the house, figuring out my taxes, or picking up groceries at Costco. I pay folks to do those tasks for me so I can spend the time dedicated to more enjoyable or lucrative pursuits. Many people outsource their personal finances since they don’t enjoy it and want it to be handled correctly.
For many retirees, this point rings true. They have spent four to five decades in the workforce. They don’t want a new part time job researching how to best allocate their investments or the latest strategies to save on taxes. Instead, they will pay a financial advisor to handle these tasks so they can spend their time on the golf course, relaxing with friends or family, or pursuing other endeavors that spark more joy in their life.
3) You’re too emotionally involved: Getting emotional about your investments is common, but it almost always leads to bad decisions. Some of the biggest mistakes people make about money are not related to intelligence or lack of knowledge. Rather, they are due to behavioral issues. Being scared, excited, or triggered in some way all can cause rash money decisions.
In an election year, this point is especially important to emphasize. Having the politician you voted against elected as president may cause some people to liquidate their portfolio or attempt to “hide” in certain areas of the market. Making decisions based on who is in the oval office is never the right approach.
Beyond politics, there are always potentially emotional times. This may involve geopolitical issues, company-related news, or an emotional attachment to a certain area of the market. The best advice when it comes to emotions and your portfolio is to keep them in check. Hiring a financial advisor to stand in your way to prevent you from making imprudent, emotionally charged decisions with your money is an extremely effective financial strategy.
4) Family financial continuity: There are some folks who have the interest, time, and emotional stability to handle their own finances. However, their spouse or other family members don’t share these same interests. If the financial quarterback of a family dies, their partner will need financial guidance going forward. Oftentimes, a family will hire a financial advisor to serve as a sense of continuity for their family’s finances. The same advisor that they’ve been working with for years is continuing to help them make good money and investment decisions. Leaving loved ones in good hands upon your passing is one of the biggest motivators for families to hire a professional.
There are true “do-it-yourself” types who love handling their investments. They have the time to do it and a Zen-like temperament, so they don’t get riled up when the market goes into a freefall. Albeit few and far between, those investors do exist. If you, however, are not one of those people, and any one of the above points applies to you, then hire someone to help. It may be the best financial decision you will ever make.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. ParkBridge Wealth Management is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures.