Ask Yourself These 4 Questions to See if You Need a Financial Advisor - Home

Do you need a financial advisor? Ifyourea regular listener toAgingOptionsor areader of the Blog, we imagine you knowhow we wouldanswerthat question.Butin spite oftheadvice from estate planningexperts,reportssuch asthis recent article fromInvestopediasuggest thatonly around 40 percent of Americans rely on the services of a financial advisor or financial planner.Even among those 65 and older, the usage ratebarelyhoversataround 50 percent.There are,no doubt,plenty of reasons why those figuresmay be true.Somemayfeelthattheir estate isjusttoo small.Others prefer to do it themselves, using tools readily available online.But todaywerefocusing onspecific reasons whythesixAmericansin ten whodonthave a financial advisor need to think twice.What might cause thesehold-outsto reconsider?This recentWall Street Journalarticleoffers one approach a simple list of four questions you can ask yourself to helpdecide whetheritstime tocall ina financial professional.Not to giveaway the punch line, but the article (written byWall Street Journalreporter Debbie Carlson) makes this relevant point:Life milestones like marriage or retirement can create financial complexities that even do-it-yourself investors need assistance on.So, do you need a financial advisor?Letstake a deeper look.Online Tools Make This anEasy Time to be a DIY InvestorCarlson begins with the concession that there has never been an easier time to be a do-it-yourself investor.

There are so many toolsat our disposal these days: financial calculators, apps for budgeting and investing, and even roboadvisors.But, she writes, sometimes it may pay to hire somebody to help.Big life events, for instance, may change your financial picture in a way that technologycanttackle.Certain milestones, she says, like marriage or the birth of a child,can be a wise time to meet with a professional.Theserepresentseasons when your money or tax situation can change, butany shiftin the marketlike inflation or volatilitycan bea good timeto ask for help in crafting a plan.Quality Advice Can Be Pricey but BenefitsMake It WorthwhileJust like with anything, you get what you pay for.

Carlson writes, The advice doesnt come cheapa traditional fee equal to 1percentof your managed assets means youre paying $5,000 a year on a $500,000 portfolio, though there are anincreasing number of lower-fee alternatives.She adds, Still, whether youre new to investing or are a longtime saver, there may be times when you could benefit from a financialadvisor, as a sounding board for your own plans if not outright guidance.Here are four questions that Carlson suggests asking to help you decide whether or not to bring in the professionals.Question 1: Am IOn TrackWithMy RetirementSavings?Simply put: if the answer is no, and youdontknow how to get yourself on track, then Carlson suggests that calling an advisor might be the wisest move.A professional planner can look holistically at your contributions, asset allocation and spending and map out a good long-term strategy and calculate what annualized return you may need overtimeso you take an appropriate amount of risk, she explains.In this scenario, a financial advisor can also help survey any financial-wellness offeringsmade available through your workplacethat you can add to your arsenalto bettermeet your goals.Workplace Retirement Plans May Not Be EnoughMarni Gibson, president of the North American Securities Administrators Association,warns thatsimplytaking advantage of workplace retirement planslike a 401(k)with matching employer contributions, for examplemight not be enough to reach a long-term savings goal as big as retirement.Carlson writes, In addition to looking at your personal contributions and spending, a financialadvisormay also look at the impact of other investments on your total portfolio, such as company stock.Many people have too much of their employers stock in their portfolio, and a financialadvisormay suggest a different savings and investment strategy to bolster long-term growth while cutting risk.Gibson agrees with this approach.Maybe there are other opportunities within your workplace plan that youre just not aware of because you have done the same thing for so long and its worked, she says.Question2:Am ITruly Ready toRetire?Saving moneyisntalways easy, Carlson tells us, butitsstraightforward: [Y]ouhaveyears to accumulate wealth, and small mistakes made along the way wont necessarily wreck your chances of long-term success, she writes.However, when you get close to retirement, there are complicated questions that arise and making mistakes can wreck your financial outlook.This is where a financial advisor can be especially helpful.

They can work with pre-retirees to set them up properly for the future: mapping out spending, claiming Social Security at the mostoptimaltime,decidinghow much to withdraw in both up and down markets,determininghow to handle assets, andhelping witheverything to do with relevant taxes.This Isnt Back-of-the-Envelope TimeChristine Benzis thedirector of personal finance and retirement planning for investment-research company Morningstar,and shesaysthatone area where DIY investors often struggle is with portfolio-drawdown strategies.While popular guidelines exist, such as withdrawing 4 percent of your portfolio annually, she says that thiscommon notionisntarealplan.This is not back-of-the-envelope time, Benz says.You really need someone who is going to put some precision around how much you can reasonably spend, and ideally your retirement spending would change a little bit throughout your retirement time horizon.Managing Required Minimum Distributions TakesKnowledgeAnother task that a financial advisor can help you withis planning a strategy on how to manage the required minimum distributions(RMDs)from traditionalindividual 401(k) or other retirement accounts,as well as mitigating tax burdens, says Gerri Walsh,senior vice president of investor education at the Financial Industry Regulatory Authority.This is because the mandatory withdrawals are taxable; depending on your other income, you might accidentally push yourself into a higher tax bracket ifyourenot careful.Thinking ahead to map that out is best done in advance, before the first actual withdrawal,Walshsays.Question3:As I Age, Will I Still be Able to Manage My Investments?Walsh says that those who havebotha high levelof investment knowledgeandtime to research and manage their investments may not need a financial advisor.At leastnot initially.But as investing becomes more complex andour ability tokeep upfalters, it may be worth bringing in someone to help.She asks,If you are thinking of more complex strategies, [do you know] the tax implications, and do you have a strong enough grounding and understanding of long-term capital gains, short-term capital gains?Age, cognitive decline, or an increasingly hectic schedule can all be signs thatitstime to hire a professional toassistyouandto act asa fail-safein case you ever require backup.Benz uses herself as an example: she and her husbandhave given their advisor all of the relevant documents and plansso that the professionalcan temporarily step in to handle finances whenever its needed.Question4:Am IReady toListen toAdviceand ChangeMy Ways?Sonya Lutter, a financial psychologist and founder of the Institute for Systemic Financial Professionals, saysthatitsvital to askyourself a two-part questionbefore seeking any financial advice: How important is it to change your behavior, and how confident are you that you will change?Rate your answers on a scale of one to ten, she says, with ten being the most important, and this willdeterminehow much benefityourelikely to get from the advice you ask for.Concluding the article, she says,Unless the answer is five or higher in importanceyoure wasting your time and money seekingoutafinancialadvisor.Rajiv Nagaich Your Retirement Planning Coach and GuideThe long-awaited book by Rajiv Nagaich, calledYour Retirement: Dream or Disaster,has been released and is now available to the public.Retirement: Dream or Disasterjoins Rajivs ground-breaking DVD series and workbook,Master Your Future,as a powerful planning tool in your retirement toolbox.

As a friend ofAgingOptions, we knowyoullwant to get your copy and spread the word.Youveheard Rajiv say it repeatedly: 70 percent of retirement plans will fail.If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families and you want to make sure itdoesnthappen to you then this book ismust-read.Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yetitsone that results in millions of Americans sleepwalking their way into their worst nightmares about aging.Rajiv laysbarethe shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.Rajiv then offers a solution:LifePlanning, his groundbreaking approach to retirement planning.

Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.Your retirement can be the exciting and fulfilling lifeyouvealways wanted it to be.Start by reading and sharing Rajivs important message.And remember, Age On, everyone!(originally reported atwww.wsj.com)