Should I give my money to a financial advisor?
The right decision is going to depend on your unique financial situation and how much you can afford to pay an advisor. If all goes well then the length of time shouldn't be an issue to you, financially, because the returns can more than pay for the advisor's contributions.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
Whomever you choose to work with may eventually want information on your income, investments, and other assets, as well as your current debts, insurance, and tax situation. This article will discuss all of the documents you might need. Still, perhaps more important than any documents are your goals and expectations.
Should you tip your financial advisor? No. You definitely want to understand all the different ways you're advisor is getting paid, from whom and how much you're really paying him/her. Once you know, you'll understand tipping is inappropriate.
It might come as a surprise, but your financial professional—whether they're a banker, planner or advisor—wants to know more about you than how much money you can invest. They can best help you achieve your goals when they know more about your job, your family and your passions.
But they don't offer their advice for free. While the typical annual financial advisor fee is thought to be 1%, according to a 2023 study by Advisory HQ, the average financial advisor fee is 0.59% to 1.18% per year. However, rates typically decrease the more money you invest.
Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.
The 80/20 rule retirement emphasizes the importance of focusing on actions that yield the most significant results. When planning for retirement, concentrate on the 20% of your efforts that will have the greatest impact on your financial future.
- Your values about money and your vision for your future.
- What life events are happening or could potentially happen.
- Short- and long-term life and financial goals.
- Investment questions.
- Your current financial situation.
You may be asked to provide financial documents such as: Bank statements. Investment statements. Insurance policies.
What to avoid in a financial advisor?
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
Visit FINRA BrokerCheck or call FINRA at (800) 289-9999. Or, visit the SEC's Investment Adviser Public Disclosure (IAPD) website. Also, contact your state securities regulator. Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.
- Make sure they are a Certified Financial Planner (CFP). ...
- Make sure your advisors or their firms (and your investments) are registered with the SEC.
- Check their past for SEC rule violations.
- They Ignore Your Spouse. ...
- They Talk Down to You. ...
- They Put Their Interests Before Yours. ...
- They Won't Return Your Calls or Emails.
Poor performance, high fees, strained communication and stagnant advice are among the reasons to look for a new advisor. Kevin Voigt is a former staff writer for NerdWallet covering investing.
But these professionals are only as good as the service they provide their clients. If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find a new advisor who is willing to go the extra mile to keep you as a client.
Estimates on the return on investment from having a financial advisor vary. In a 2019 whitepaper, Vanguard assessed an “Advisor's Alpha,” or the value that a financial advisor adds to a client's portfolio, to be about a 3% net return per year, depending on a client's circ*mstances and investments.
The study found that 70% of millionaires versus 37% of the general population work with a financial advisor.
Schwab and CSIM are subsidiaries of The Charles Schwab Corporation. There is no advisory fee or commissions charged for Schwab Intelligent Portfolios.
Can I negotiate the percentage I pay my adviser? The short answer is yes. Ken Robinson, certified financial planner at Practical Financial Planning, says while a 1% fee may be common, advisers who charge based on AUM are increasingly scaling down from 1% at lower thresholds in the past.
Are advisor fees tax deductible?
No, they aren't. At least not anymore. The Tax Cuts and Jobs Act (TCJA) of 2017 put an end to the deductibility of financial advisor fees, as well as a number of other itemized deductions. As of January 2018, these fees no longer contribute to reducing your tax bill.
By working with a fiduciary, you can have peace of mind that the advice you're receiving is unbiased. Further, you can trust a fiduciary to make and execute investment decisions on your behalf. However, this is not to say that financial advisors are not trustworthy.
At ages 56 to 60, you should have saved 7.6 times your current salary. At ages 61 to 64, you should have saved 9.2 times your current salary. Source: Chief Investment Office and Bank of America Retirement & Personal Wealth Solutions, "Financial Wellness: Helping improve the financial lives of your employees," 2023.
| Age | Number | Percentage |
|---|---|---|
| 40-49 | 25,555 | 25.8 % |
| 50-59 | 21,896 | 22.1 % |
| 60-69 | 16,803 | 17.0 % |
| 70-79 | 5,430 | 5.5 % |
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
