July 29, 2023

When Should You Invest in a Financial Advisor and Why do You Need One?

Hiring a financial advisor to help you reach financial goals is a personal decision. And the reasons for working with financial professionals and advisory firms are as varied as the people who hire them. Beyond budgeting or retirement planning, these reasons might be that:

  • You need help managing a significant amount of assets: If you’ve amassed a sizable amount of liquid wealth, a financial advisor can design a personal investment plan tailored to your goals and show you where and how to invest to aim to grow your assets and continue building wealth.
  • You’re nearing retirement: As you get closer to your retirement, it’s time to begin ensuring that your current financial assets are enough to support you throughout.
  • You’re planning to make a big purchase: If you’re planning to buy a home, start a business, or make a significant purchase, your advisor can help strategize how to make it happen.
  • A significant life change just occurred or will occur very soon: Getting married, having a child, or experiencing a death in your family presents financial implications that a financial advisor can help you navigate.

But first — what is a financial advisor? Let’s take a look at what these wealth management professionals provide and how they can help you navigate your financial future.

What is a Financial Advisor?

Financial and wealth advisors are investment management professionals who help create solid strategies that enable you to better manage your money.

A couple of titles that often are used interchangeably (and shouldn’t be) are financial advisors and fiduciary financial advisors — but there’s a pretty big difference between them:

  • A financial advisor often earns commissions, fees, or some other type of in-office performance remuneration for providing certain services to clients.
  • A fiduciary financial advisor, on the other hand, must make investment decisions based on how the outcome may affect the client and make only those investments or adjustments that aim to favor the client.

Fiduciaries and financial advisors can guide you with their knowledge of:

A financial advisor can help you aim to minimize your taxes when appropriate, customize an investment plan, and help you save and budget for your future.

Should I Get a Financial Advisor or Do it Myself?

It’s important to weigh the pros and cons of financial advisors vs. a DIY approach, taking your unique life goals, your net worth, and the many varied financial investment opportunities into account.

Many people underestimate the calculated moves required in financial management, find themselves drowning quickly, and in need of assistance quickly before risking their wealth.

Some of the most important things to consider include:

  • Your knowledge: If you are already knowledgeable about personal finance and investing, you may be able to manage your own money. However, if you don’t have a lot of experience, it can be helpful to work with a financial advisor.
  • Your situational complexity: If your financial situation is relatively simple, you may be able to manage it yourself. However, if you have a lot of assets or a complex financial situation, it can be helpful to work with a financial advisor.
  • Your risk tolerance: If you’re comfortable taking risks with your money, you may be able to manage it yourself.

If you’re risk-averse, have a non-typical situation, limited knowledge of the investment world, or simply don’t have the time, it might be best to work with a financial advisor.

What Makes a “Good” Financial Advisor?

If you’re inexperienced in financial management, it’s a case of “you don’t know what you don’t know.” So, how do you choose a financially savvy advisor to aim to protect and sustain your lifestyle and set you in the direction of your ideal retirement scenario? What should you look for when choosing your partner? 

Consider their degree status, certifications, and years of experience, which will help ensure you’ve chosen the advisor that can help you plan for your future financial goals.

Different Types of Financial Advisors

Each type of financial advisor has their own strengths and weaknesses:

  • Fee-based financial advisors: These advisors charge a fee for their services, which is typically a percentage of the assets they manage for you. The fee is usually based on the size of your portfolio. This type of advisor is often considered to be the most objective, as they are not paid on commission.
  • Registered Investment Advisor: These advisors are registered with the Securities and Exchange Commission (SEC) and are held to a fiduciary standard, which means they are required to aim to act in their clients’ best interest.
  • Financial Advisors who earn commissions: These advisors are paid on commission for the products they sell. This type of advisor may be more likely to push certain products that will generate a commission.
  • Robo-Advisors: These are digital platforms that use algorithms to create and manage investment portfolios. They are less personalized than human advisors and offer a more automated approach to investing.

When it’s time to choose a financial advisor, choosing the right financial advisor for the first time can be a scary spot to be in. The financial advisor you settle on should be able to not only offer investment advice but should also be able to help you plan out your finances.

Does Your Financial Advisor Offer Financial Planning?

Financial planning is a process that shows you where you stand financially right now and helps create a plan that leads you to your future financial goals. A good financial advisor typically  offers financial planning services including:

Your financial advisor should also be a professional who is well-skilled in helping you aim to avoid the mistakes that could reduce  your amassed liquidity. 

Planning Your Retirement & Succession

Some financial advisors, like Churchill Management, specialize in helping clients plan for retirement and succession. This includes creating a comprehensive financial plan to ensure a secure and comfortable retirement, as well as developing strategies to pass on assets and business ownership to the next generation.

Retirement planning evaluates your current financial situation and future goals, as well as considers factors such as Social Security benefits, pension plans, and investment portfolios to create a customized retirement plan. Your plan should include strategies to save and invest, as well as options for generating income during retirement.

Succession planning is an offshoot of retirement planning, as it involves the transfer of wealth, assets, and business ownership from one generation to the next. This process can be complex and emotionally difficult, which is why an advisor will work  closely with clients to identify their goals, concerns, and any potential roadblocks. They will work with their estate planning attorney and tax professional to assist in developing a succession plan that takes into account tax implications, estate planning, and other factors that may impact the transfer of wealth.

Generational Wealth

Creating generational wealth is a long-term goal for many families, and it involves passing on financial assets and values from one generation to the next. This process starts with getting kids on board and preparing them for what they have in store.

Advisors will work with families to educate their children about money, budgeting, investing, and other financial concepts. This includes teaching the importance of saving, living within their means, and avoiding debt.

Preparing children for their role in managing wealth also involves communication and planning. A succession plan outlines the transfer of assets and responsibilities, helping ensure a smooth transition and reduce the risk of conflict and misunderstandings.

Overall, creating generational wealth is a multi-step process that requires commitment, education, and preparation. But by working together, families can build a solid financial foundation that lasts for generations.

Transferring of Wealth 

Transferring wealth to the next generation can be a complex process that requires careful planning and consideration of a variety of factors. Financial advisors play a critical role in helping clients transfer wealth to their desired beneficiaries, whether that’s family members, friends, or charitable causes.

You need to make your goals and wishes known. This is one of the first steps in transferring wealth. Your loved ones should understand (and even share) your values, as well as your desired outcome for your accumulated wealth. An advisor  can help you understand your options, including how to bequeath items through a will, trust agreements, charitable giving, and more with the assistance of an estate planning attorney.

They can help you communicate your plans and intentions to your beneficiaries, including preparing family members for their role in managing the wealth, and ensure that everyone understands your wishes.

Avoid Making Financial Mistakes

Your financial advisor can help you avoid making costly financial mistakes, such as neglecting to:

  • Diversify your investments
  • Understand the risks of investing
  • Understand the tax implications of investments
  • Have a plan for retirement

Discover Personalized Financial Solutions with Churchill Management

Hiring a financial advisor or wealth manager can help you manage your money for generations to come. Choose an advisor who is qualified, experienced, and has the right certifications to help you create a plan aiming to achieve your financial goals, and avoid costly mistakes.

Book a call with Churchill Management Group for your complimentary consultation today.

Financial Planning Services

Churchill provides financial planning services to Clients that specifically engage Churchill for that service. The planning can include defining goals, designing a plan, assisting with implementing the plan, and evaluating and adjusting the plan over time, at the request of the client. The financial planning includes advice regarding securities investing, and may include discussions of a client’s tax, insurance, employee benefits, estate planning and other issues. Churchill, however, does not provide legal, insurance, employee benefit, estate planning, tax or accounting advice, and the client must rely on legal, insurance and accounting professionals for that advice and documentation.

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