When to Consult a Financial Advisor to Manage Your Earnings

by Oyinade Afe
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Man and woman

Managing your expenses can be a daunting task. Especially when you know little or nothing about managing finances.

You have just received some funds and you need to reach some financial goals, how do you go about it? Now, let’s get started!

What Does a Financial Advisor Do?

A financial advisor is a person who offers the professional services of planning, managing, and advising clients on how to handle their finances. They also help in budgeting, managing investment and debt payoffs, real estate, and even planning for events like vacation, and retirement.

You can address a financial advisor as a “financial planner” or “financial partner.” This is because as a client, you have to be 100% transparent with them on your expenses and your financial conditions except if you want to waste your service payment.

Who Can Consult a Financial Advisor?

Anyone can consult a financial advisor. Many average or low-income-earning people have claimed that consulting a financial advisor is only for the rich.

However, due to what is at stake, the charges of consulting a financial advisor won’t be up to a quarter of the loss incurred after wasteful spending or mismanagement of your finances.

Oftentimes, financial advisors charge a percentage based on Assets Under Management (AUM). This is based on the value of what you are consulting them for. They mostly charge as low as 0.5% or 1%. Some have a fixed price while the prices of some vary depending on the type of service, their level of expertise, and the mode of compensation.

Also, make sure you compare the fees and services of different financial advisors before hiring one and ask for a written disclosure of their fees, compensation, and conflicts of interest.

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Classification of Financial Advisors

Before consulting a financial planner, it is crucial to know how their charges and compensation may affect the advice they give. Below are two common classifications of financial advisors:

  1. Fiduciary financial advisor

These advisors are legally obligated to put the client’s best interest over theirs. They are not meant to remove their charges from whatever they are managing or advising the client on. They get their fees separately for their general services.

  1. Non-fiduciary financial advisor

They are not legally obligated but whatever advice they give still has to be good for the client’s financial situation. They may get commissions from third parties for selling or recommending certain products or services.

When to Hire a Financial Advisor

  1. To reach financial goals

You may need to hire a financial planner if you have specific financial goals that require careful planning and execution. For example, if you want to go on vacation once every year and also save a certain amount of money for retirement, you need to balance your spending and saving habits as well as allocate your income wisely. 

A good financial advisor can help you create a realistic and customized financial plan that takes into account your income, expenses, risk tolerance, and time horizon. They can also help you choose the best investment options for your retirement portfolio, and adjust your plan as your situation changes over time.

  1. Managing income

Another reason you may need to hire a financial advisor is when you have trouble tracking your spending and saving habits. Many people struggle to keep track of where their money goes after they receive their income and may end up spending more than they need or want to. 

Financial advisors can help you create an effective budget that reflects your income, expenses, and financial goals. By working with them, you can gain more control and clarity over your money. You can also achieve your financial objectives faster and easier.

  1. To figure out how and where to invest

You just received a sum of money and don’t know what to do with it. You can seek the advice of a financial advisor on where to invest and even how to go about it.

At some point, you might also be unsure of how to use your income wisely. A large sum of money can come from various sources, such as an inheritance, a lottery win, a lawsuit settlement, or a retirement payout. A financial planner can help you figure out the best way to invest and manage your windfall, depending on your financial situation. 

They can also help you avoid common pitfalls, such as overspending, paying too much taxes, or falling victim to scams.

  1. Navigating major life changes

One sensitive situation that might warrant you hiring a financial advisor is when you are getting married and want to merge your finances with your partner. A financial counsellor can help you create a joint budget, set financial goals, and plan for taxes and insurance. 

Another scenario is when you are about to build an estate and need guidance on how to manage your assets and liabilities. A financial advisor can help you design a practical timeline that works for your budget and advise you on estate planning strategies.

  1. Managing debt or loan repayment

Another reason to hire a financial counsellor is when you are struggling with debt, such as student loans or credit cards. They can help you create a plan to pay off your debt as quickly and efficiently as possible. They can also help you negotiate with your creditors, consolidate your debt, or refinance your loans to lower your interest rates. 

A financial advisor can help you balance your debt repayment with your other financial goals, such as saving for retirement or buying a home.

When You Should Not Hire a Financial Advisor 

  1. Good understanding of financial situation and goals

You may not need a financial planner to do these tasks for you if you understand your financial conditions and how to manage your finances to a great extent. You also don’t need one if you can create your financial plan and manage your investments, using online tools or robo-advisors if needed. Of course, this does not mean that you should never consult a financial advisor. It depends on your preference.

  1. Know when, how and where to invest

Another reason you may not need a financial counsellor is if you are a financial expert and you do not struggle when it comes to investments. Also, you might have learned over the years, having consulted financial planners and some finance apps over time. You have come to understand how these things work and do not need help in managing your finances.

  1. Have a simple financial situation

One of the reasons some people may not need a financial counsellor is that they have a simple financial situation that does not need complex planning or advice. For example, if you have a low income, few assets, or minimal debt, you may not encounter financial challenges that need professional guidance. 

You may be able to manage your money effectively by following some simple financial principles, such as budgeting, saving, and investing wisely. You may also be able to use online tools or resources to find answers to your financial questions or problems. 

Thus, hiring a financial advisor may not be worth the cost or effort for you, especially if you are satisfied with your current financial situation.

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Hiring a financial advisor can be a smart decision for anyone who wants to manage their earnings better and achieve their financial goals. A financial counsellor can offer valuable guidance and support on various aspects of personal finance, such as budgeting, investing, debt management, estate planning, and more. 

Whatever financial situation you may find yourself in, they can help you make the most of your money and avoid costly mistakes. However, before you hire one, make sure you do your research and go for a reputable professional who suits your needs and preferences.

Edited by Priscilla Ajayi.

About Author

Avatar of Oyinade Afe
Oyinade Afe
Oyinade Afe is a versatile writer, designer, and filmmaker with a passion for telling stories. With more than 3 years of experience in content writing, she excels in crafting compelling narratives, visually stunning designs, and producing engaging films. Oyinade is dedicated to authenticity, creativity, and inspiring others through her work.

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