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How Much Money Do I Need Before Hiring a Financial Advisor?

A commonly held misconception is that only very wealthy people benefit from the services of a paid financial advisor.

In truth, anyone who wants to grow their savings stands to gain by working with a financial advisor. You don’t need to be a millionaire, or even remotely close to it, to get valuable, practical advice that can help improve your overall financial health.

Some advisors insist on clients having a minimum amount to invest, with thresholds ranging from $100,000 to $1,000,000. However, most financial institutions have advisors who will work with clients regardless of the initial investment amount.

Basically, if you’re not already an experienced financial expert but you want information and advice on managing your money, hiring an advisor is often a smart, worthwhile choice. However, it’s important to find someone to work with who is responsive and listens to your needs – you don’t want to have a difficult relationship with the person handling your important financial matters.

Let life be your guide

For some people, life events drive the decision to solicit professional financial advice. Landing your first job and starting to earn an income is one common reason, but others include getting married, starting a family, inheriting money, and starting or selling a business.

Others use personal goals as a reason to get help with managing their money. Whether you’re saving for retirement, a first (or second) home, an education fund for your kids, or simply your next big family vacation, the input of a trusted advisor can help turn your dreams into reality.

Other ways to know whether you need an advisor

Asking yourself a few questions about your financial situation can help determine your need for an advisor. For starters, do you feel like your current financial plan is working for you, or would you prefer to be on a different path?

If you’d like something different, ask yourself the following: Do you have money saved to see you through a period of unemployment or some other emergency? Do you enjoy financial matters, and feel confident and comfortable making decisions, or do you dread money matters and struggle to understand the options? Do you have free time to devote to financial planning and staying on top of your investments? Your responses to these questions will inform your need for external financial advice.

What can an advisor help with?

Experienced financial advisors assist their clients with a range of issues. While retirement planning and general savings/investment advice is arguably the most common reason people seek help from financial advisors, it’s far from the only service offered.

Depending on your needs, you can rely on a financial advisor to help you develop a budget, control and eliminate debt, reduce your tax bill, obtain a loan or mortgage, offer information and advice on insurance products, or get assistance with estate planning. A good financial advisor will also make clients aware of any programs, grants, or other offers they may be eligible for.

What will it cost you?

Quality financial advice isn’t free, but it’s worth thinking of the cost as an investment in your own financial health and security.

Different advisors charge different fees depending on what’s asked of them. Some charge by the hour for consultations, while others charge a flat fee for their work.

In some instances, advisors will charge an annual fee equal to a percentage of your total investment amount, say 0.25 percent or one percent. For instance, if you’ve invested $50,000 into a retirement savings account with an advisor who charges one percent, you’ll pay $500 for the advisors’ help managing your money.

Another option is for advisors to charge a commission each time they make a financial transaction on your behalf. Some advisors charge both a flat fee and a commission fee. Make sure you fully understand an advisor’s fee structure before agreeing to work together.

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