If you’ve ever tried cutting your own bangs or snaking a clogged kitchen sink, you’ve probably learned the hard way that you get better results when enlisting an expert. And that’s true in money matters as well. Sure, you may understand the basics of spending and saving, but are you truly setting yourself — and your family — up for financial success not only today but five, 10, or even 20 years from now? If the answer is, “Um, I’m not sure,” you may want to check in with a financial advisor to solidify your goals and dreams. for you and your family. And that starts with putting together a plan.
Now, we know what you may be thinking: But I don’t pull in six figures or own five vacation homes. Can a financial plan still help me?
The answer, according to money guru Carrie Schwab-Pomerantz, CFP® is a resounding yes. “A lot of people think they don’t have enough money to need a financial plan or that it costs too much,” says Carrie. “They’re putting the emphasis on ‘financial.’ To me, the emphasis should be on ‘planning,’ because having a financial plan simply means knowing where you want to go and figuring out how best to harness your resources to get there.”
Working with a financial advisor can be a powerful step towards getting that financial plan in order, but you’ll want to make sure you’ve got the right person by your side. We partnered with Charles Schwab to learn what you should consider when choosing a financial advisor, and make sure to visit Carrie’s column, Ask Carrie, for this and other vital money questions that you and your family may have.
1. What level of help do you need?
Financial planning is not a one-size-fits-all proposition. Your single friend who’s dreaming of buying an apartment in the city is going to have much different goals than your mama-of-two bestie who’s worried about eventually putting kids through college. Pinpointing the type of advice and planning assistance you need, therefore, is an important first step in the process. The good news is that there’s never been a better time to work with a financial advisor.
Brand new investors who are looking for basic investment management, for instance, may want to start with automated investment advice, says Carrie.
“Harnessing the power of technology, a number of online services can build a well-diversified portfolio based on your stated goals,” she says. “This type of service may rebalance your portfolio automatically, and for an additional fee may also provide access to a financial advisor.”
Working with an advisor can help you with both big-picture planning and specific investment advice. Some providers offer automated portfolio management services and financial planning services on a subscription basis, similar to paying for streaming services. If you have more assets (typically more than $250,000-500,000 you might consider an advisor who offers more customized investment strategies that could include retirement and tax planning. And, finally, if you want help with all things money management — think: investments, retirement, estate planning, education planning, and insurance — there are advisors who can provide comprehensive financial planning and advice, and help you coordinate your strategy with other professionals you work with, such as estate planners, tax advisors, or insurance specialists …
2. What type of financial advisor is best?
CPAs, RIAs, CFP®s — financial professionals come in all shapes, sizes, and initials. And, once again, figuring out which one is right for you will depend on your goals. A registered investment adviser (a.k.a. RIA), for instance, is registered with a regulatory body (such as the Securities and Exchange Commission or a state securities regulator) to “provide financial advice and/or investment management, which can include buying and selling securities,” says Carrie. On the other hand, a CERTIFIED FINANCIAL PLANNER™ professional (a.k.a. CFP® professional) can “help you with big picture planning as well as with portfolio management.”
These are just two of the many types of money minders out there, so do your research to figure out the kind of help you need. What’s crucial is working with a financial advisor or financial planner that understands your situation and has your interests at heart.
3. How do you and the financial advisor mesh?
In some ways, finding the right financial advisor is like finding the right architect or hair stylist. You want to make sure your advisor listens to and understands your goals, is someone you can trust, and who communicates on your level — not theirs. Luckily, many money pros offer a free consultation, during which you can ask them questions and get a sense of whether the two of you will work well together.
“Ask about education, time in the business, number of clients, types of services and amount of money under management,” says Carrie. “Find out about their investing philosophy and preferred types of investments. And get very specific about how you will be charged and why.”
Be a smart shopper. Before selecting an investment advisor or financial planner, you should know exactly what services you want, any experience and background they have with people in your circumstances, limitations and incentives on products they recommend, and how and when they will interact with you — over the phone, online, in person, or all of the above.
Pay attention to your rapport and how they treat your goals. If, for instance, you tell them you’d like to start saving for a two-week tour of Italy’s wine regions and they dismiss your dream as silly, they may not be the one for you. Remember: You aren’t stuck with the first financial advisor you call. A good relationship is highly collaborative, but ultimately based around you and your goals.
4. What should you do first?
Once you’ve found a financial advisor you feel comfortable with, it’s time to get down to the basics.
Start with listing out your goals and then rank them in order of importance. What is it that you want to accomplish? Where do you want the most help? You should also jot down any major financial worries, wants, and wishes.
Next, consider creating a net worth statement, which lists all of your assets and debts. This will help you figure out exactly where you stand. Gathering this information along with what you’re currently saving and spending will help you and your advisor figure out how to make your dreams become a reality.
“The goal of financial planning isn’t just to crunch the numbers,” says Carrie. “It’s to discover your priorities and give you a blueprint for taking action — whether it’s paying off debt or saving for a child’s education. These aren’t high-finance issues, these are people issues.”
5. What are you missing?
Even if you think you’re acing a specific area of your finances and don’t need help — say, your 401(k), which you’ve been contributing the max to since you started at your company — it doesn’t hurt to have your financial advisor take a second look. “There are a lot of pieces to our financial lives. And sometimes it’s hard to see them all, let alone how they fit together,” says Carrie. “A set of trained eyes can help you address any savings shortfalls, improve your budget, and save on taxes.”
Think of hiring a financial advisor or planner like hiring a housing inspector. They can keep you from worrying about benign situations (five-year-old roof) and help you identify things that might need your attention. In short, they can help you identify gaps, uncover opportunities, and explore different “what if”s.
6. How will you stay involved going forward?
Even with the help of a financial advisor, you can’t put your finances on autopilot. Your goals and life circumstances will most certainly change over time, and you’ll need to be an active participant in the planning process to make sure you’re set up for success.
“Stay on top of things,” Carrie advises. “Make sure you understand the thinking behind any recommendations and advice. And remember, it’s your money; the final decisions are ultimately yours.”
This article is sponsored by Charles Schwab. Make sure to visit Ask Carrie for any and all money advice you might need. The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.
