You may be asking yourself “Do I need a financial adviser?” or “Should I manage my own investments?” These are very common questions. When thinking about this, there are 5 main considerations to help you decide on.
Do You Have Time To Devote to Financial Planning?
The age old saying goes “Time is a terrible thing to waste.” The most valuable commodity you have is time. Between going to work, dropping the kids off at school, cooking dinner, walking the dog, or travelling, do you really have the time to monitor the markets, rebalance your accounts, keep tabs on the economy, or research investments? Your time is precious, and having an adviser in your corner who can do all of the above tasks (and more) gives you more time to focus on the things that matter most to you.
Do You Want to Manage Your Finances?
Does staying up to date on business news and reading financial articles sound fun, or does it sound like a boring chore? Assuming that you actually have the time, do you want to keep up-to-date on the latest in the financial world so you can effectively manage your money? Or would you rather spend your time having fun travelling or making fun memories with your friends and family? If it’s the latter, you may not want to take on managing your investments on your own. It’s important to put in the work to manage your investments well so that you can achieve your financial goals.
Do You Have the Knowledge to Manage Your Finances?
The world of investments and finances can be a complicated place, laden with confusing jargon and complicated tax code. When evaluating whether you should manage your assets on your own or hire an advisor it’s important to consider whether you understand how to effectively diversify your investments using an appropriate asset allocation. Do you have the expertise to evaluate the many potential investments and have the knowledge to adjust your investing as the seasons in your life change? If you are unsure of your understanding, it could be beneficial for you to seek out an expert (such as a Certified Financial Planner®) who can see the big picture of your financial world and execute a plan to help you succeed.
Do You Have Knowledge to Reduce Your Tax Liability?
Following the tax code can be difficult, especially when you’re dealing with capital gains, wash sales, various retirement accounts, and all kinds of other regulations about contributions or distributions. A financial advisor’s expertise can help you to navigate these waters and help you to minimize your tax liabilities. If you feel comfortable about IRS regulations and understanding their lingo you may be able to do it yourself.
How Does Investment Volatility Impact You?
Because personal finance is more personal than finance, your emotions are an important factor to consider. Think about the last time that the stock market crashed. How did you react? Did it stress you out? Were you afraid? Were you angry? Were you tempted to sell all of your investments and bury your money in the backyard? If the day-to-day volatility of investing negatively impacts your emotional life, it may be useful to have a financial advisor who can manage your accounts (especially when the stock markets are down or are acting like a roller coaster) and talk you off the ledge when you’re about to make a bad decision.
If you don’t have the time, desire, knowledge, tax knowhow, or don’t want to deal with the emotions of investing, hiring a financial advisor could be to your advantage. If you feel comfortable with the above you may be able to do it yourself, but it could be helpful to get a second set of eyes on your financial situation to make sure that you’re not missing anything.
If you’re still not sure which route to go, you can download and complete our self-assessment “Should You Hire a Financial Planner or Self-Manage Your Finances”?
Make sure to check out our other resources about How to Find a Financial Advisor and Questions to Ask a Prospective Advisor.