When it’s the right time to hire a financial advisor is a good question and one that is personal to your specific situation.
For some people, there may be a major life catalyst like a divorce or an inheritance that abruptly impacts your financial life. For others, it’s not so sudden. It could simply be a growing complexity in your financial situation to the point where you realize a financial professional is necessary to help you manage it all.
There are many instances when hiring a financial advisor is a smart financial decision. If you have been wondering if now is the right time for you to consider adding a financial advisor to your team, here are a few signs and instances that may confirm your suspicions:
Signs You’re Ready for a Financial Advisor
Here are a few tell-tale signs you may be ready to welcome a financial advisor into your financial life:
- You have received equity compensation: It is increasingly common for firms to offer equity compensation as part of the hiring package, but once you accept the offer, you take on the responsibility of managing both the costs and benefits of these awards! The tax consequences of certain actions relating to equity compensation are typically immediate. In most cases the tax consequences are irreversible, and the IRS will expect you to pay your taxes whether or not you have the proceeds to do so. Therefore, please don’t DIY this important aspect of earning what you are worth. Equity compensation commonly comes in the form of Employee Stock Ownership Plans (ESOP), stock options: Incentive Stock Options (ISO) or Non-Qualified Stock Option (NSO), Restricted Stock Units (RSU), or an Employee Stock Purchase Plan (ESPP).
- You’re starting to think seriously about retirement: There comes a time in life when you realize that you’ve been saving diligently for many years but you aren’t quite sure how far along you are or if you have done enough to secure your future. If you’ve wondered, “When can I retire?” or “How much more do I need to save?” or “How much will my retirement income be?” you are likely in this phase of life and ready to work with a financial advisor.
You’re changing careers or employers: Whenever you make a big move professionally, it can impact your financial life. Especially if you are changing careers or switching employers as a seasoned and highly-compensated professional. A financial advisor can help you transition your retirement assets and reassess your finances in light of your new circumstances. For instance, if you are changing employers and have a large 401(k) balance, you need to take that with you by rolling it into an IRA when you leave your current employer. You definitely don’t want to trust your entire financial future to some Wall Street mutual fund manager.
- You are getting a divorce: Splitting assets after a marriage comes to an end can be tricky business. A financial advisor can ideally help you work through the financial details and coordinate with your attorney so you can negotiate terms that represent your best interests, as well as understand what a final settlement means for your future. From there, a financial advisor can help you put back the pieces of your financial life after a divorce and create a plan designed to help you reach your financial goals in your next chapter of life.
- A loved one has died or has become injured: If you didn’t have a financial plan in place before the passing of a loved one or before a major injury, now may be the time to reach out to a financial advisor. With the loss of a loved one, many estate issues can arise that impact your finances. In the case of injury, if you or your spouse is unable to work, re-evaluating your finances and insurance coverage is a necessary step to help keep you on track as you navigate your new circumstances.
- You’ve suddenly come into a large amount of money: If you’ve suddenly come into a lot of money, it can be overwhelming to know how to handle it responsibly. A financial advisor can help you align your new wealth with your goals and priorities. One of the highest values a fee-only fiduciary financial advisor can offer is helping you make smart money decisions that are in your best interest. So, whether you are one of the lucky few to win the lottery, are the recipient of an inheritance or large settlement, or come into a lot of wealth unexpectedly, it’s probably a great time to start interviewing financial advisors.
Your finances aren’t coordinated: Maybe you have a CPA that does your taxes, an investment advisor that manages your investments, and an insurance broker who sets up your coverage. But each aspect of your financial life is compartmentalized and none of your financial professionals are coordinating their efforts on your behalf. Frankly, when this happens you run a big risk that when something changes in one aspect of your financial life, it will actually contradict or undermine one of the strategies in another. If this is you, it’s definitely time to consider a financial advisor.
- Your finances have become complicated: In my experience, most people handle their finances on their own until complex financial issues cause them to reach out to a professional. Maybe you own a business and need a tax-deferred savings account, own multiple real estate assets, find yourself in complex investments, or any other number of situations that exceed your level of expertise or comfort level to handle your finances anymore. When this happens, it’s a good idea to reach out to a financial advisor who can manage complex financial matters like these while ensuring you are still on track to achieve your longer-term goals.
- The weight of your financial decisions carries much higher risk: When you are young and just starting to build toward your future, a financial misstep here or there probably didn’t set you back too far. However, as you advance through the years and your career and get closer to retirement, you don’t have the same luxury of time to rebound from a financial mistake. A financial mistake in your fifties with hundreds of thousands, if not millions of dollars, could delay retirement or dramatically alter your lifestyle in retirement. As your wealth grows, so, too, does your potential for great losses if you make a financial misstep. This is when having a financial advisor is critical to your success so you have someone helping to safely steer you, and keep you, in the life of your dreams.
As a word of caution, it’s worth noting that some financial professionals who call themselves financial advisors or planners are really just commissioned-based investment managers and only focus on and care about the accounts they manage. In all the signs I mentioned above, working with a credentialed, educated and experienced, fee-only fiduciary advisor is what I recommend.
As a CERTIFIED FINANCIAL PLANNERTM (CFP®), it is my highest goal to help clients reach financial goals and achieve the life of their dreams. If you are even thinking that it may be time to work with a financial advisor, chances are it is! I can’t overstate how valuable it is to have an objective and qualified professional working with you to manage your financial life.
Because we at Hendershott Wealth Management are comprehensive advisors, we take a big picture view and can help ensure that all of the aspects of your financial life are working in concert with one another. From ongoing financial education, management of your investments, creating a tax-efficient strategy, preparing for known and unknown obstacles, providing accountability for the steps you need to take to reach your goals, and all around planning for financial success… that’s what comprehensive financial advisor can do and what we can do for you.
Reach Out to Us
If now is the right time to consider bringing a comprehensive financial advisor on to your wealth team, we’d love to chat. Our initial series of conversations are complimentary and without obligation and will likely be quite valuable to you in your long-range thinking and planning. Go here to schedule a Discover Meeting where we can both find out if we might be a good fit to work together. We’ll be in touch right away to schedule your call! We look forward to hearing from you.