People often hear terms like “financial planner” or “investment advisor” and wonder if they should have one. One way to help determine if you should seek help from an investment professional is to understand what services they provide and how they could potentially help you achieve your financial goals.
What is an Investment Advisor?
Sometimes referred to as a financial advisor or wealth manager, an investment advisor specializes in investment advice. They can help you create an investment strategy and make strategic investment decisions to help you reach your specific financial goals. Some investment advisors directly manage their clients’ investment portfolios by making trading decisions, while others simply provide you with guidance and recommendations based on their expertise and understanding of the market. How hands-on you’d like your investment advisor to be is a personal decision, and will depend on a variety of things such as your risk tolerance level, knowledge of investments, and unique financial goals.
Evaluating Your Financial Situation
Before choosing an investment advisor, you should determine your financial needs. When you know exactly what services you want, you can better choose an appropriate financial planner. Before you embark on hiring an investment professional, you should review things like your current net worth, retirement savings, expected future education expenses, how much money you currently earn and spend on a monthly basis, your existing savings habits, and your specific financial goals, whether they include saving for a home, saving for college, saving for retirement, or something else.
Here are some specific things that an investment advisor can likely help you with:
- Realizing Your Financial Goals. In many cases, investing is necessary to reach your financial goals without a significant boost in income. An investment advisor can help you carve out an investment plan that aligns with your long-term goals
- Deciding How to Invest Your Money. An investment advisor can help you determine the appropriate amount of money to invest, and can help guide you toward the types of investments that fit with your financial goals and risk tolerance. An investment advisor can also review any potential tax consequences or tax implications regarding your investments.
- Selling a Business. If you are a business owner who might consider selling your business down the road, you should seek out a financial advisor who specializes in buy/sell agreements and business succession planning. A business investment professional can also help you manage funds from the sale of your business.
- Navigating Big Life Events. If you recently got married, had a baby, got divorced, or are closing in on retirement, an investment advisor could be very helpful with getting you on track financially. Whether that means getting started with investing, untangling co-owned assets from a spouse, or adjusting your financial goals due to a major life change, a qualified financial professional could provide the guidance you need.
- Managing a Lump Sum of Money. Any time you receive a lump sum of money, whether it be from an inheritance, a lawsuit, an insurance policy, or even winning the lottery, an investment advisor can help provide guidance on the best way to handle the funds. A qualified financial professional can educate you on potential tax implications and help steer you toward smart investment options.
- Being Accountable with Your Income. If you already have an investment plan, but have trouble regularly contributing funds to it, an investment advisor may be able to help motivate you to invest more by helping you to be more strategic with your portfolio and improve your overall return on investment. While there’s always a risk involved with traditional investments, having the guidance of a qualified professional can help alleviate some of the stress that can come with investing.
Do Your Homework
Before you choose an investment advisor, it’s critical for you to do your due diligence. You should ensure that your advisor is licensed and experienced, and that they have a good track record of helping others manage their money. You should also ensure that both you and your advisor are compatible. An investment advisor should understand your financial goals, and communicating with them should be easy and comfortable. You should also have a good sense of what fees will be involved. Be sure to inquire about their compensation structure while vetting potential advisors.
If you are considering working with an investment advisor, BankFive may be able to help. Learn more about our investment management, retirement planning, annuity planning, education planning, and business investment services.