Managing your own financial affairs requires a broad knowledge of your financial options. It requires an aptitude for choosing the most appropriate investments, monitoring those investments, and making sound decisions about whether or not to hold on to those investments. To make the right decisions, you need to keep abreast of the markets, new laws, and new financial products. Having the time to do the necessary research and obtain the prerequisite expertise is just one of the reasons why you might want to hire a financial adviser. If you are not certain that you need a good financial adviser, the following list of 10 things an adviser can do to make a difference may convince you to hire a professional.
- Create a plan to achieve your financial goals
Your financial goals will usually change over the years. When you are younger, you may want to buy a house, save for your children’s education, and perhaps start a business. You can afford to take more risks, and your portfolio should be geared more toward growth than income. As you get closer to retirement age, you become more averse to risk, and you seek safety in income-producing investments. Your focus, rightly so, should shift away from speculative investments and risky stocks that can potentially go down in value. Your adviser will sit down with you, get to know you, and come up with a strategy that will best suit your short- and long-term needs.
- Make sure you are properly diversified
Managing risk is a fundamental skill that every investment adviser learns to master before ever seeing a client. It takes discipline and a certain mindset to refrain from putting the bulk of your money into one or several hot stocks. Hot stocks may soar for awhile, but eventually, they come back down to earth. While the ultimate decision to buy or sell any shares or investments is up to you, it is never wise to make a trading decision without understanding the possible consequences. Your adviser is there to temper your unbridled enthusiasm and make suggestions on how to build a portfolio that reflects your investment goals but does not take unnecessary risk.
- Make sure you have the proper asset allocation
One of the most common problems with portfolios that are not managed by a professional is that they do not contain the right asset allocation for the age and risk tolerance of the portfolio’s owner. An adviser can tell you how much you should have in shares, bonds, precious metals, property, or any other types of investments.
- Making you make a change
Staying with the same investment for too long is a problem many amateur investors tend to make. When there are better opportunities to be had, your adviser is there to motivate you to make changes now.
- Help you avoid tax issues
Selling any investment at the wrong time can not only cause you to lose out if the value of the investment goes up but can have serious negative tax consequences. Your adviser can help protect you from incurring higher taxes by informing you of the implications of selling at a particular time.
- See that you have the insurance that you need
Life, health, long-term care and many other types of insurance can help protect your family and your assets in the event of a crisis situation. Your adviser will evaluate the types of insurance needs you have and encourage you to maintain the proper amount of coverage.
- Help you save for retirement
Are you saving enough for retirement? Are you making the right investments, so you will have enough money when you retire? Your financial adviser is a great source of guidance for retirement planning.
- Advise you on how best to access money
If you need money for your business or for any other reason, your adviser can offer sound advice as to which investment is best to sell. He or she may offer you a better alternative, such as getting a loan from a bank.
- Offer you alternative investments
Alternative investments, such as real estate or purchasing an interest in a small business, are not always readily available through normal channels. Your adviser may be able to find opportunities outside of the mainstream that are not correlated to more traditional investments. Those alternative investments can add diversity to your portfolio and lower your overall risk.
10. Help you plan your legacy
We all want to leave some type of legacy for when we are no longer around, and your adviser is just the person to help you create such a legacy. You may want to set up a trust, give money to a charity, or ensure that your business will remain in the family. Whatever your desire may be, your adviser can create a strategy to make your wishes come true.