Why do people turn to a personal trainer? It’s because they have a goal to achieve whether it’s to lose weight, to add muscle or tone their body, or just to lead a healthier lifestyle. They seek the help of a professional to keep them guided, on track, and accountable while they aim to reach these health objectives. The same concept should apply to people working with a financial advisor. Individuals and couples often turn to financial professionals because they have a goal that they need help reaching – whether it’s investing for retirement, getting their budget on track, saving for their children’s college education, or other financial goals.
Just like a personal trainer, recognizing that you need assistance from professionals and getting started is the very first step. Below, we outline when the right time to start working with an advisor might be, and how to find the right professional for you.
Milestones to consider
Many people often think they need a specific amount of money in their bank account before they can work with an advisor. That’s not true. Avoid associating a number to it because that will only delay the opportunity to begin this partnership early.
Instead, individuals and couples should think about lifestyle decisions and/or “triggers” that might influence them to seek assistance. Some of those milestone “triggers” include:
- Getting married. When combining finances, an advisor can act as a mediator of sorts. An advisor can assist in decision-making when it comes to saving for retirement, children and college planning, how the couple will handle and pay down debt, budgeting, etc.
- Having a baby/expanding your family. Having a baby comes with a new territory of budgeting and expenses. Advisors can help with establishing goals for the future of your family, like assisting the setup of a 529 plan or helping you purchase or assess a life insurance policy.
- Switching jobs. When switching jobs, an overlooked element is what someone should do with an old 401(k). Working with a financial advisor can provide best practice tips, for example, should you rollover your qualified plan to an IRA or your new employer plan? Is it a good time to convert IRAs to a Roth IRA? Should I set up a traditional IRA? Also, an advisor can guide you in the right direction if you have accumulated more than one employer-sponsored retirement account over your career.
- Inheriting money. Inheriting a lump sum of money can trigger quite a headache of tax concerns, so an advisor can help in overseeing this process. An advisor can help you transition the inheritance assets into the proper accounts and be sure they are established correctly. When inheriting assets in an IRA, there are certain rules that need to be followed depending on who left you those assets. Not properly following those rules could result in additional taxes and penalties.
Working with the right financial advisor
Whether it’s one of the milestones listed above or another trigger that has led you to seek the assistance from a financial professional, it’s critical that you work with the “right” advisor. Look for an advisor that will work closely with you in 1). Understanding where you are with finances, and 2). Where you want to be – in one year, five years, 10 years and beyond. Make sure the advisor offers to meet on a regular basis, whether it’s quarterly, annually, over the phone and/or in person.
During those meetings, the advisor should always be going back and giving an update on the goals you set together at the start of the relationship. Additionally, it’s of equal importance that the advisor’s philosophy aligns with yours.
Your advisor should be the quarterback, in essence, of a larger team of professionals. As goals develop and needs change, and/or your wealth evolves, you will likely need new professionals’ guidance (an estate planner, an accountant, etc.). A good advisor will coordinate those meetings and align you with professionals that are also like-minded in helping you achieve those goals.
When it comes to your financial success, working with the right financial advisor and beginning this relationship as early as possible will help ensure you are on a good path with goals. Having someone on your side to help navigate through your financial roadmap and to get you where you need to go is what a true, trusted, loyal client-advisor partnership is all about.