David Perrotto, an advisor with Perrotto Private wealth, has been helping people with all different backgrounds for over a decade, and he says he still finds that people overlook the value of an advisor and misunderstand what they do.
Many people believe that advisors only sell what’s best for the advisor, what’s best for the company they are working for, and usually sell based on specific products.
On the contrary, a good financial advisor isn't going to sell you a specific product in order to make a commission. Instead, a quality advisor will listen to your goals, look at your current finances and recommend how best to move forward with your money, and build you an actual plan. Then help you execute that plan going forward.
While you don't always need to work with an advisor on an ongoing basis, there are times when it makes sense to stop in for some financial advice and consultation.
When you start working for a new company. It doesn't matter whether it pays $40,000 a year or $400,000 a year, starting a job is a good reason to check in with a professional financial advisor. Not only can they advise you on how to best save for retirement, they may also provide insight on how to maximize your employer's benefits package.
Getting married or divorced. Another good time to seek out professional financial advisors: whenever you enter or leave a marriage. Bringing in an unbiased third party can help minimize financial losses in a divorce and may make it easier for engaged couples to have conversations about combining assets and income in their marriage. Having an unbiased third party can help remove the emotional mistakes couples me. For example, a spouse might feel attached to a family home and insist on keeping it as part of a divorce settlement. In exchange, he or she may lose out on retirement savings that could prove to be much more valuable in the long run.
When you receive a large sum of cash. Receiving a large sum of money, such as from an inheritance, bonus, buyout or big raise, should be a boon to your financial health. There are many vehicles that will allow you to defer taxes, help your overall balance sheet, and grow your net worth. Unfortunately, many people tend to squander the opportunity for financial advice that it presents. Regardless of the amount of your windfall, meeting with a financial advisor can ensure you put the money to good use and not waste it.
When you need to take care of aging parents. People should consider all options on what kind of advice financial advisors can provide. Many advisors are also registered to sell insurance. Aging parents want to stay in their homes, so it’s worth to check out what your financial advisor can do for you. If you think your parents or another elderly loved one will need care, either in-home or in a nursing home, talking to a financial advisor sooner rather than later can help you prepare for this sizable expense.
When you are thinking about retirement. Retirement planning is one key area where financial advisors do their best work. You should begin planning in your 50s, at the latest. Most good strategies need to be set up 10 to 15 years in advance. Just like you wouldn’t plan to buy a home the day before you purchase it, the same goes for retirement planning. Everyone around age 40 should check in with an advisor just to see where they stand and what they are not thinking about. Making sure you are hitting your financial goals 20 to 30 years in advance of retirement, will still give you plenty of time to make adjustments and save more if needed.
When you are preparing to pass on your wealth. At some point, you and your money will be parted forever. When you start to think about estate planning, it can be smart to bring in a professional for the discussion. A financial advisor may be able to suggest ways to minimize estate taxes, plan for final expenses and review beneficiary details on accounts.
When you are worth a quarter million. In most of the above cases, you may only want to pay for a single visit with a financial advisor, ongoing paid financial advice may not be necessary. However, once your income and assets reach a certain point, you may want to develop a regular working relationship with an advisor who can keep you on track of your financial goals. People start acting to emotional once you reach 200,000 to 300,000 in liquid net worth, and it makes sense to bring in an unbiased 3rd party to keep your priorities in order, and make sure you stay on target. A great article on TheBalance goes over why in the twenty years ending on 12/31/2015, the S&P 500 Index averaged 9.85% a year while the average equity fund investor earned a market return of only 5.19%. Bear markets and volatile market conditions make it difficult for people to be prudent with their money and practice sound financial planning. Rather than allow a market to stabilize, they may react in fear, sell off declining investments and then lock in their loss by missing the inevitable bounce back in fund values. Beyond helping you make rational money and investing decisions, a professional advisor can help decipher increasingly complex tax laws and investment strategies that apply to high-income earners.
Advisors are the only professionals that are proactive on their choices they make for you, as opposed to your CPA and attorney, who are reactive on your choices. Financial Advisors plan for the future, and try to guide you through any speed bumps that may come with that plan, while CPA’s and attorney’s plan for your future, based on decisions you already made. EG: A financial Advisor may build a plan to save money and buy a house, while a CPA will help you deduct mortgage interest after you have already bought the house. Any one of these reasons is good enough to reach out and find a professional that will help get you where you want to be, or help you shield yourself from risks you are not aware of.