Friday, May 7, 2021

7 important reasons to talk with a financial adviser right now

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(CNN) —  

The last year has been tumultuous, to say the least, and that’s true whether we’re talking about the coronavirus pandemic, the economic upheaval it caused or the financial markets as a whole.

The Dow Jones Industrial Average dropped below 19,000 in mid-March of 2020, only to climb to record highs over 30,000 by the end of the year. Meanwhile, Bitcoin surged from just below $5,000 per coin in March last year to a record $50,000 per coin this February. And we all know what happened with GameStop, Reddit’s Wall Street Bets and a few unfortunate hedge funds.

If you haven’t been paying attention to it all, that’s probably the right move. After all, some of the best financial advisers suggest that doing nothing other than sticking with your original investment plan is usually the best course of action when it comes to your portfolio — especially when the market is volatile.

However, if you’ve never made any investments, or you’re not really sure about the investments you already have, you may be more confused than ever given everything that’s happened over the last 12 months. In that case, it can make a ton of sense to speak with a financial professional who has your best interests in mind.

So what exactly does a financial adviser do? Well, that really depends on what you need the most help with. But here are seven important reasons you may want to talk to a financial adviser sooner rather than later.

Some investing opportunities that have come and gone over the last year have left many with a severe case of FOMO (Fear of Missing Out). Yet, your best bet may be doing exactly the same thing you’ve been doing all along while ignoring all the noise.

Why? Because, according to financial advisor Jeff Rose of Good Financial Cents, making a poor investment decision could easily cost you tens of thousands of dollars — or hundreds of thousands or more — in terms of your net returns.

Imagine if you had originally invested in a broad, sensible, diversified stock portfolio, and then you didn’t have anyone to turn to during the market’s darkest days last March. Fearful of taking more losses, you decide to sell everything…and you completely miss the market’s record-breaking rebound.

For many, a financial advisor is the only person who knows their situation well enough to talk them out of poor financial choices. “That’s why working with a trusted professional such as a fee-only financial planner is one of, if not the best, money move you can make right now,” says Rose.

Get matched with a financial advisor who can create a personalized plan and help you stick to it.

Without a financial advisor, it's easy to lose sight of where you are on the path to retirement.

PHOTO: iStock

Without a financial advisor, it’s easy to lose sight of where you are on the path to retirement.

Will you be able to retire when you want? And will you have enough assets to live the lifestyle you prefer? According to California financial advisor Christopher Struckhoff, these are incredibly important questions for people to ask, even if most people fail to do so.

A financial advisor can help you figure out if you’re investing enough, if you’re investing often enough, if your investments are aligned with your goals and risk tolerance and what steps you should be taking now to get to where you want to be.

In essence, helping you map out your financial future is the main job of a financial advisor.

Alabama financial advisor Cleve Gantt says a lot of the investing “noise” we’ve heard lately may be drawing people into high-stakes action with undue risk.

“It’s so easy to become intoxicated with the success of having a few big winners in the short-term,” says Gantt. However, history has shown that good luck doesn’t necessarily last until next year, much less a lifetime. And concentrating all your investments into a single stock like Gamestop, or even a single sector like cryptocurrency, exposes you to an inordinate amount of risk.

With that in mind, it’s best to take the emotion out of investing, and to make financial decisions based on long-term goals instead of short-term greed. A financial advisor can help you do that, but only if you let them.

Due to our growing national debt and other factors, it seems likely that taxes will rise significantly at some point, possibly far down the line. That’s why Wisconsin financial advisor Brian Behl says it’s important to work with a financial advisor if you’re not already.

A financial advisor can help you properly plan to minimize your expected lifetime taxes, he says. Without one, you could be putting too much money into pre-tax accounts — like a 401k or IRA — which could ultimately result in facing a higher tax bracket in retirement.

“Forward-looking planning can prevent this by focusing on minimizing lifetime taxes and not just looking at the current year,” he says. So if you’re unsure of what you could be doing now to reduce your future tax burden, you may want to find a financial advisor who can help.

Talk with a financial advisor about your tax situation and how to minimize what you owe.

Business owners in particular should consider relying on a financial advisor for investment planning.

PHOTO: iStock

Business owners in particular should consider relying on a financial advisor for investment planning.

According to financial advisor Christopher Clepp, business owners in particular need to work with a qualified financial advisor who can help them stay on track with their financial goals. This is especially true since business owners have access to different (and sometimes better) investment accounts for retirement than their peers.

Not only that, but Clepp says most businesses fall into one of two categories these days — barely keeping the doors open, or growing so fast they can barely keep up.

“Either way, you should focus on your business running smoothly and let a financial planner take care of your investments and financial plan,” he says.

Let’s say you already have a basic roadmap for investing your money for retirement. Who helped you craft it, and when? And does it still make sense given your current lifestyle and goals?

Taylor Schulte, a California financial advisor and the founder of Define Financial, says now is the perfect time to find out for sure if your current financial plan is still right for you.

“The financial markets have been screaming upwards for almost twelve years now,” says Schulte. “Right now is the perfect time to get a second (or third) opinion to ensure your investments are properly aligned with your financial plan, and not when we experience another catastrophic drop.”

Schulte says that, in good times and in bad, it’s wildly important to have a plan in place and know exactly how much risk you’re taking while the markets are healthy. If you do, he says, you can confidently ride through the difficult times without making irrational decisions or losing sleep.

“Remember, time in the market is more important than timing the market,” he says. With an updated plan that accounts for every possible scenario, you can feel confident about staying the course.

Click here to ask a financial advisor if you’re on the right track, or if you need to change course.

Finally, don’t forget that financial advisors have been required to adopt new fee structures over the years to keep up with changing times. Where many advisors were hardly more than “financial salespeople” a few decades ago, many of today’s financial advisors use a “fee-only” model that simplifies the cost and prevents them from earning commissions on products they suggest.

Look for a financial advisor who's a fiduciary, such as a CFP, and that charges on a fee-only basis rather than getting paid through commissions.

PHOTO: iStock

Look for a financial advisor who’s a fiduciary, such as a CFP, and that charges on a fee-only basis rather than getting paid through commissions.

Many (but not all) financial advisors are also fiduciaries, meaning they’ve agreed they will be legally required to put your interests first. But there are still plenty of financial salesmen out there pushing whole life and annuities that earn them big commissions at your expense.

To find out how an advisor operates, you have to ask. Schulte says that, just like choosing a doctor or lawyer, it’s important to find an advisor who’s a specialist and has the right expertise to help with your unique situation. Look for a fee-only financial advisor or a CFP who’s a fiduciary. And if an advisor you interview refuses to answer when you ask, that could be a huge red flag.

Choosing whether or not to use a financial advisor is a personal decision that depends on your goals, your experience with investing and how much time you have to devote to financial planning. Many people already have enough to do on their plate, and bringing on an expert to handle the financial side of things can mean more time to spend with your family.

So, if the last 12 months have made you think twice about your investments — or made you eager to jump into investing for the first time — talk to a financial advisor and get some guidance about the best ways to handle your money.

Learn more about financial advisors and find one that fits your personal goals and needs.

Get all the latest personal finance deals, news and advice at CNN Underscored Money.

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