How much money should I have to meet with a financial advisor?
Some traditional financial advisors have minimum investment amounts they require to work with clients. These can range from $20,000 to $500,000 or even more. Why? Because their fees need to cover their time and expertise, and managing smaller portfolios may not be cost-effective for them.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
If you have less than $50,000 of liquid assets then you may also want to consider going at it on your own as the fees might not be worth it. With that said, financial advisors can bring a wealth of information and experience to the table that can make a huge difference in your potential return.
Graduating college, getting married, expanding your family and starting a business are some major life events that might cause you to reevaluate your financial situation. A financial advisor can help you manage these life events while making sure you get or stay on track.
You should meet with your advisor at least once a year to reassess basics like budget, taxes and investment performance. This is the time to discuss whether you feel you are on the right track, and if there is something you could be doing better to increase your net worth in the coming 12 months.
For example, 80 percent of your business comes from 20 percent of your clients. By focusing more on those clients, you can increase your profits. This principle extends to other areas, as well—including marketing and client communications.
- Your values about money and your vision for your future.
- What life events are happening or could potentially happen.
- Short- and long-term life and financial goals.
- Investment questions.
- Your current financial situation.
It's smart to use a financial adviser when you need or want professional financial advice. If you happen to have a high net worth and you're comfortable managing it yourself, there may be no need. Even if you don't have a high net worth, if you have a complex situation to deal with, you may want to consult someone.
- Idea 1: Quality stocks.
- Idea 2: Emerging markets.
- Idea 3: Corporate bonds.
Those who use financial advisors typically get higher returns and more integrated planning, including tax management, retirement planning and estate planning. Self-investors, on the other hand, save on advisor fees and get the self-satisfaction of learning about investing and making their own decisions.
What is a red flag for a financial advisor?
On the other hand, fee-based or commission-based compensation structures can both be financial advisor red flags. These advisors may earn part or all of their compensation in sales commissions. In other words, they may be more incentivized to sell products than give advice.
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
It might come as a surprise, but your financial professional—whether they're a banker, planner or advisor—wants to know more about you than how much money you can invest. They can best help you achieve your goals when they know more about your job, your family and your passions.
Clients always have a choice when it comes to whom they work with. This is particularly true in the early stages of the client/advisor relationship: One study indicated that, on average, of those clients who leave to find a new advisor, 20% do so within the first year and 25% leave within the second year.
There are definite risks involved in getting too friendly with a financial advisor, or hiring a friend who is a financial advisor. "It's a good idea for everyone to take a more proactive approach with their own investments," says Vic Patel, a professional trader and founder of Forex Training Group.
"If judging performance only, clients need to give an advisor three to five years minimum, and realistically, five-plus is probably better," said Ryan Fuchs, a certified financial planner with Ifrah Financial Services. "It may take several years before you can truly see how an investment strategy will work.
The wealthy also trust and work with financial advisors at a far greater rate. The study found that 70% of millionaires versus 37% of the general population work with a financial advisor. Moreover, 53% of wealthy people consider advisors to be their most trusted source of financial advice.
Yes, it is not uncommon for financial advisors to charge a fee based on a percentage of the client's portfolio value. A fee of 1.5% per year is within the range of typical advisory fees. However, the specific fee structure may vary depending on the advisor, the services provided, and the size of the portfolio.
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
Be prepared to talk about your income, regular expenses and monthly cash flow. Provide a summary of your debt—including your mortgage, credit cards, student loans, car loans and other debt—and the interest rates and terms on the loans. Provide your insurance and estate-planning documents.
What questions will a financial advisor ask you?
- What are your current financial concerns? ...
- What are your short- and long-term financial goals? ...
- What do you hope to gain from financial planning? ...
- What is the latest update on your current financial situation? ...
- Who are you financially responsible for?
A good advisor always starts by identifying your goals — even your hopes and dreams — and then turns that understanding into a personalized financial strategy that can help you make those dreams come true.
7. Seek Professional Finance Advice. Of high-net-worth individuals, 70 percent work with a financial advisor. You can compare that to just 37 percent in the general population.
Your adviser's fees will be based on many things: what advice you need, how much time it will take, and the size of the assets involved. Advisers often charge between 1% and 2% of the asset in question (e.g. a pension pot), with lower percentages being charged for larger assets.
Several financial advisors such as Dave Ramsey and Robert Kiyosaki are most known for their print publications. TV personals including Suze Orman and Ben Stein are recognizable financial advisors.
