Many people ask themselves if they need someone to help them manage their finances. This is a very personal decision with no universally correct answer. However, there are some advantages to hiring a financial advisor vs managing your own money. Conversely, there are also benefits for those handling their own portfolios. If you are uncertain which route is best for you, consider seeking some professional expertise.
What Do Financial Advisors Do?
“Financial advisors play a key role in helping you plan and attain your future financial goals. They will help you determine how much to save for retirement or family planning and choose the best accounts for you. Furthermore, a good financial advisor will ensure you have appropriate insurance coverage and coach you through estate and tax planning. Accounting help is what you might get as well.
The reason for hiring a financial advisor is to provide a wealth of information no matter what financial quandary you find yourself in. Part of their job is to educate you in areas where you are unfamiliar. Your financial advisor can help you understand complex issues and lead you to the best solution.
Before they take you on as a client, financial advisors first assess your risk tolerance and goals. Next, you will create a financial plan and a timeline to enact it. Once your portfolio is established they will also make and manage your investments. The greatest benefit of hiring a financial advisor is regular monitoring and updates. This means you will not need to be actively involved unless you want to be.
What are the Benefits of Managing Your Own Money vs Hiring a Financial Advisor?
However, if you prefer to take a more hands approach, there are several benefits to managing your own money. It’s true that not everyone needs an advisor. According to Vanguard, about 25% of private investors are considered ‘self-directed.’
Managing your own money helps you take a long-term view of your finances. Since there are no advisors needing to justify your portfolio’s short-term performance, you can ignore the short-term fluctuations. Second, it allows you greater control. Self-directed investors can create specialized plans and make quicker decisions. You will also save a significant amount of money in fees if you don’t have to pay a middleman. When you don’t see the returns you expect, it may be difficult to justify the expense.
Should You Hire a Financial Advisor or Manage Your Own Money?
As mentioned above, hiring a financial advisor vs managing your own money is a very personal decision. Although, it never hurts to do some research or reach out to a professional when you are confused, overwhelmed, or afraid of making a serious financial mistake. It’s also not a bad idea to approach advisors when you are stable to make sure you are on course. Perhaps they could suggest new strategies or ways to fine-tune your plan.
However, if you are a competent investor and feel you could produce better results, managing your own money may be the better option. You can always reach out with specific questions as well when you need expertise or advice. This is a decision only you can make. Weigh your options carefully and do your research with all your important financial decisions.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.