Is there a typical minimum amount of money that a financial advisor will work with?
I think you are asking two things: What will I get for the fees I pay an advisor and do I have a portfolio large enough to retain an advisor?
Retaining an advisor will generally result in your getting an investment program in place: You will typically get a financial plan, and road map to achieve it (i.e. a tailored asset allocation) and on-going management of your money (portfolio management).
In contrast, if you decide to do it yourself you run the risk of not getting started at all. (Think: It’s easy to plan to get physically fit; a lot harder to go to the gym three times a week!).
Portfolio size: The size of portfolios that different advisors will accept varies widely. Two factors seem to determine this “minimum portfolio size”: The bandwidth available at the advisory firm and the investment model of the advisory firm.
Why not talk with a few different types of advisors where you live? It may be easiest just to ask the advisor if your portfolio suits their firm. Many firms are willing to give you a second opinion on your portfolio.
Hi Carny! As a consumer, you will want to determine what you want to accomplish by working with an advisor. As Alexander referenced, different advisors do different things. A planner can help you with budgeting, determining insurance needs and retirement planning. A wealth manager may manage your investments. Some CPAs hold additional personal financial planning designations as well. It can be a challenge to choose as there are many different labels in our industry. Look past the title to what the advisor actually does.
After you decide what you are looking for, then you can determine the type of minimum balances and fee structures work best for you. Some advisors charge fees up front for advice, some charge commissions based on the product purchased, and some charge by the dollar amount of assets they manage.
Your question: is it worth it? I believe everyone can use the services of a financial planner. Planners can help you "find" money in your budget, select assets that are appropriate for your investing comfort level, and help provide appropriate insurance coverage. Everyone can guess at this information, but a planner will help educate you and help execute the plans that can make your goals successful. You can't put a price on that.
I may be slightly biased in this regard but I'd say the answer to your question is a resounding "YES"! Just as you would see a doctor for medical care and take your car to a qualified mechanic for service, why leave your finances to chance? There are financial professionals who have dedicated years to learning the intricacies of the financial system, the tax code, and the investment world to bring value to their clients and help them achieve their goals. I believe this is more important now than ever given the level of complexity involved with financial planning and investment management.
With that said, I do recommend that you choose your financial professionals carefully and look for credentialed and licensed individuals who will put your interests first. Working with a fiduciary (make sure you get this in writing) will help ensure that you are working with someone who has your best interests in mind.
As for the minimum amount of money that financial advisors are willing to work with, this can vary significantly from one advisor to another. Some will not work with clients with less than $5 million while others may require a minimum of $1 million. However, many advisors have lower minimums. Other firms, such as my own, do not have any asset minimums and can work with all sorts of clients regardless of the dollar amount in the account.
I hope this answer is helpful. If you have any additional questions, please feel free to reach out.
Most people can benefit from professional guidance when they venture into the complex and confusing world of managing their financial affairs. A financial advisor will be able to assess your risk tolerance, analyze your resources and current asset allocation, take into account your tax liability, and make investment recommendations in the form of a written financial plan that will help you to achieve your goals. The plan may help ensure that your current and future assets are used to their best advantage given your current financial situation and your financial goals. Some investors find that they don’t have the time, energy or talent to research and identify stocks for their portfolio, much less manage their money effectively. Their needs go beyond the scope of a stock broker - they may need the services of a qualified financial adviser.
A good financial adviser will work with you to develop a game plan that fits your financial circumstances and tailors a plan to accomplish your goals. Some people find that they are more comfortable doing their “own thing” and don’t want to spend the money a good adviser may cost. On the other hand, many people gladly turn over the details of developing a financial plan to an expert.
Most financial advisers want to look at your whole financial picture – all your income and liabilities. They want a complete picture of where you are financially so they can draw a map from where you are to where you want to go. Here are some of the benefits of using a financial adviser:
The Big Picture – A financial adviser will develop a comprehensive profile of your financial status. This profile will identify areas of strengths and weakness.
An Unemotional Assessment – The financial adviser will give you an unemotional assessment of what needs to be done. Money is an emotional topic for many people, which often leads to bad decisions.
Allocate Resources – It is likely you have competing priorities, such as sending the kids to college while building a retirement fund. A financial adviser can help you allocate resources so both goals receive the appropriate share of dollars.
Minimize Taxes – Most investment decisions carry some type of short or long-term tax implication. Your adviser can help you shape your investments in a manner that keeps taxes to a minimum and more of your dollars invested.
Estate Planning – Careful planning will help ensure that your estate passes to loved ones in a manner that protects as much of its value as possible.
Depending of the type of financial adviser you use, you will get some form of financial plan that details the findings of the adviser and provides a blueprint to reach your goals. The plan may include options to reach your goals that involve different levels of commitment on your part
Financial advisers come in variety of flavors, each with their strong points. There are three basic ways you compensate financial advisers for their work: fee only, fee and commission or percentage of assets and commission only. In the end, you should choose the adviser you feel will do the best job for you and worry less about the method of compensation.
If you decide to use a professional financial adviser, the most important considerations are the person’s integrity and your relationship. Method of compensation and other factors are secondary to establishing a level of trust that will allow you to work with the adviser in confidence.
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I would recommend a book titled "The Investment Answer" by Goldie and Murray. Not only do they immediately answer the question you ask in a very direct way, the book also will add value in shaping some investment ideas that I believe many advisors on this forum will agree with. The book is a quick 80 page read and you can order it on Amazon for around $6 with shipping. I hope this helps.
Is it worth it to hire a financial advisor? The answer depends on your perspective and what you are looking for. First of all, the term “Financial Advisor” is used by a great many people from insurance agents to stock brokers to Registered Investment Advisors (RIA). I often use the analogy of a cattle ranch. The owner – you – own the ranch and you hire me – an RIA - as the foreman. It’s my job to run the place, hire the cowhands, assign the jobs and supervise the work. I report to you and as long as I do my job to your satisfaction I stay on. If I fail, or we don’t get along you have the right to fire me and find another foreman. You are concerned about the bottom line and leave the details to me. That kind of an arrangement usually means that both the ranch owner and the ranch foreman prosper because they are both focused on the same goal. Is it worth it? Well, here’s one answer: most wealthy individuals and institutions hire advisors because they know it’s the smart thing to do.
Carny - I agree with Rich in that it primarily comes down to time. If you don't have the time to educate yourself AND maintain the plan you set, then you should probably consider partnering with a financial advisor.
You have to decide what's the most effective use of your time. I take my car to a mechanic because i don't have the time or desire to learn how to fix it myself. If i enjoyed working on cars and developed some decent experience, then it would be a different story.
The other important variable to consider is accountability (see "The Behavior Gap" by Carl Richards"). If you find yourself justifying bad investment habits or losses (ie Sold Low, Bought High because everyone else did too), then you could probably benefit from a "devil's advocate" who can tell you the facts instead of what you want to hear.
If you do choose to partner with a financial advisor, look for one who doesn't make you "feel good" all the time about your investments. It's an easy cop out for an advisor to tell you what you want to hear rather than what would benefit you the most. That's where fee-only advisors come in handy because they are financially motivated to tell you what would benefit you (and your account) the most.
Feel free to browse my website (www.appliedcapital.com) or follow me on twitter (@BUBearBrad) for helpful hints I provide my clients and friends.
I would suggest you interview Fiduciary licensed RIA's. Also, make sure they can answer non-investment questions and can provide you a financial plan. Finally, I think anyone can invest in a typical asset allocation fund using market cap indexes....but the best financial advisors will be able to add value by providing alternatives to market cap by finding alternatives based on valuation.
It depends on who you pick and why. Advisers vary a great deal in their competence, performance, service, and how well they work with you. Look for an experienced fee-only adviser because their pay does not vary with what they recommend, nor do they get commissions or contest awards that often skew objectivity. Their pay rises when your account increases, which is a pretty good setup. Interview several and pay no attention to the size of their office or how persuasive they are. You are looking for an experienced, service-minded person that takes a genuine interest in you. A good adviser may pay for his fee with getting you better performance but the main reasons to hire one are: greater objectivity, experience, expertise, time savings for you, and vetting of other good advisers like CPAs, attorneys, and insurance agents. Again, you don't want someone that appears strongly sales-oriented because those other relationships may be based not on how good they are but how many referrals they generate. Shop very carefully, because hopefully you are starting a very long-term relationship that impacts your financial well-being.
My answer is simple... If you don't have the time, desire and expertise to effectively manage your financial affairs, then the value you receive from working with a "good, experienced" financial advisor will far exceed the cost. Do you know a lot about investments, asset allocation, tax planning, estate planning or retirement plan options? Are you knowledgeable about the latest changes in tax laws and how they will affect your investments, estate planning, etc. Do you know how to utilize specific life insurance products for tax-free wealth accumulation? A good financial advisor will know all of this and more.