Let’s face it – dealing with investing in general, and retirement planning in particular, is genuinely difficult. Almost none of us went to college to study how to manage a portfolio of stocks, bonds and other investments. There’s confusing jargon, statistics and graphs! It’s easy to get confused and not know where to start or where to get impartial financial advice.
In this article, we look at when it’s sensible to take the money you’ve made in life and let a financial planner invest it on your behalf.
Do You Like to Do Things Yourself without Help?
If you’re the type of person who likes to learn how to do a new thing and then do it yourself, then it’ll be especially difficult for you to hand over the reins to someone else.
Even with the best of the best when it comes to financial advisors, it will create a sense of disquiet because unless you’re picking the investments, there’s a palpable sense of it not being under your control. It’s difficult for a financial planner to overcome that even with the best will in the world. But if you’re more than happy to let someone else handle your affairs, start looking now for the best Minneapolis financial planning company.
Is a Financial Planner Going to Know More Than You?
On the subject of planning for your financial future, where investments should go, and how to set you up for retirement, undoubtedly the answer is a firm yes.
Unless you’ve studied the same finance-oriented degree, kept up with industry changes, and have a proven track record of fiscally responsible representation, we’d say a financial professional is going to be the better choice.
How Do Financial Planners Charge Clients?
It depends on the advisor and the regulations that apply to their representation as to what their charging approach is. Some practices charge a percentage of the funds they manage on their clients’ behalf, and others receive commission when putting their clients into certain funds.
The potential conflict of interest comes into play on the commission side. How does the client know whether the selected investment was based on a higher commission or it is genuinely the better fund? That’s a tough one to answer.
With fee-only financial planners, they have a minimum funds under management requirement. This ensures they can still earn enough in fees to manage your account. However, there’s far less potential conflict of interest with how they select your investments.
When Does It Make Sense to Hire a Financial Advisor?
Unless paying via commission, there’s a minimum investment asset requirement for most financial advisors. So, when picking a financial advisor, verify how their fees stack up first.
Ultimately, when you either feel ill-equipped to manage your portfolio safely and well, or you believe that a financial planner is going to do a better job than you, then that’s the answer. In most cases, stick to index funds over actively managed ones because few investment managers beat the index funds net of fees. There are exceptions to this, but a significant percentage of your portfolio should be indexed to keep costs low.
Getting a good financial planner whom you can trust makes a huge difference to your motivation to sock money away for your future. It supplies the confidence you need to save and invest, instead of mindlessly spending and consuming. And that’s priceless.