You work hard for your money so there’s no doubt you want to benefit from the fruits of your labor. For many, this may be maximizing their income potential to the best of their capability. While saving money is important for a stable financial future, you should also strive to increase the potential of these savings to build long-term wealth. This is where financial advisors come in. They are trained professionals who provide advice on the best ways to make the most of your investments, especially in risky situations. Here are the top reasons why you may need a financial advisor.
Simplify Complex Ideas
The world of finance is large. From an investment in stocks, bonds or index funds, there are numerous ways to maximize your income. If you are unfamiliar with the technical jargon used in finance, this overload of information can get overwhelming. Moreover, other people’s opinions may steer you in a direction that may not be right for you.
This is where a financial advisor can help. They bring knowledge and resources to the table on a variety of financial topics, making it easier for you to make a more informed decision. A financial advisor can also create a tailor-made investment plan that aligns with your goals so you can make the best use of your money.
Secure Your Home
After the market crash of 2008, the housing market has become incredibly complex. The government has increased regulatory reforms on the housing market, making it more complicated for lenders to provide financing to potential home-buyers.
Buying a home is a huge investment, one that should be made after a lot of thought and consideration. Hence, it is important that you hire a financial advisor to help you take the best course of action. Your advisor will have a good understanding of the market and can seek out the best rates while assessing your risk appetite for borrowing money to buy the home.
They Bring Expertise
So you’ve made the decision to get better with your money but this doesn’t mean that you know the best way to do this. Although, there is a myriad of different ways to grow your money over the long-term, the medium you choose to invest your money in can vary depending on your goals.
It’s at times like this that it would be beneficial to seek the help of a financial advisor. Along with their resources, these professionals bring experience and expertise as well. Moreover, financial advisors undergo rigorous training and complete tests in order to provide financial advice legally. This puts them in a good position to provide sound advice in matters that concern money.
Time Is Money
The role of a financial advisor is to do research and study the markets every day to identify the best ways to invest your money. However, if you are not familiar with the financial industry, it can be difficult to take time out of your busy day to study the markets as the professionals do. This can only lead to uninformed decisions that could result in losses.
If you are looking to maximize your earnings, invest in a financial advisor to help you make the best decisions. They say “time is money” and hiring a financial advisor can help you meet all your financial goals without taking any time out of your 40-hour workweek.
Access To Resources
A financial advisor has knowledge and expertise in many areas of finance that can help you make informed decisions. But, in addition to this, that also have access to various tools and resources. While it’s true that there is a world of information available online when it comes to investments, financial advisors have financial planning tools that are not available online for free.
The financial advisor you consult with on your investments may be an individual but very often they have a team of people who help research and support the advice provided. This could be tax assistants, research analysts or operational staff.
Help You Make The Right Moves
Your financial advisor acts in your best interests and makes sure that every decision you make gets you closer to your goals. In the case of risky investments, the advisor ensures that a loss will not affect your bottom line substantially. They can help you mitigate risk and understand the potential of the investment. Therefore, it is recommended that you consult a financial advisor before making large investments like buying a house.
Making an uninformed decision can lead to severe consequences in the event that your investment does not provide the expected returns. A financial advisor can guide you through the investment process and help you make the right money moves.
Improve Your ROI
The main goal of any investment is to earn a return on the money invested. As an individual who doesn’t have a deep understanding of the ins and outs of the market, it can be hard to predict the potential Return on Investment (ROI) of an asset.
However, when financial advisors evaluate a potential investment, they consider a variety of factors like the liquidity of the asset, liability and risk management. Having an integrated view of your goals and the risks associated with the investment helps you assess the ROI and diversify your portfolio.
Build An Optimized Portfolio
Investing your money isn’t just about getting a return on a single investment, it’s also about sustaining your financial well-being in the long-term. This means creating a diversified portfolio that can protect you against any losses while maximizing growth.
Trends in the financial market are based on current events so it can be very hard to predict what can happen in the future. A financial advisor can help you create a portfolio with a balanced group of investments based on your risk appetite. As they say, “don’t put all your eggs into one basket.”
Achieve Your Retirement Goals
In the first few years of investing your income, you can focus on your short-term financial needs. However, once these goals have been met, it’s time to start thinking long-term. In other words, your retirement plan.
Accounts like your 401K and IRA Roth are great places to invest your money for retirement but there are many other options available as well. A financial advisor can provide other alternatives that can supplement the money in your retirement account and help you design a portfolio that can sustain your financial interests long into the future.
Every investment decision comes with an element of risk and while this is unavoidable, you need to play your cards right to reduce the level of risk. For an individual who is just breaking into the investment game, it can be hard to assess the risk associated with your assets.
A financial advisor can measure what is called the risk appetite. This is the total amount of risk you can take on given the current assets in your portfolio. It serves as a useful benchmark for investments in the future. For example, if you come across an attractive investment, you can calculate the risk associated with the asset to understand if you are taking on too much liability.
This may come as a surprise because financial advisors cost money. However, when looking at the bigger picture, financial advisors help lower costs all around. Given that we have a large number of investment options on the market, it can be easy to pick low-cost investment alternatives. However, if these assets make a loss, it can result in large financial consequences.
A financial advisor can help you reduce losses and maximize your investments. They can devise an investment plan based on the budget provided. Not only will this improve your finances in the long-term but you can also constantly monitor your assets to make sure you are on track to achieving your goals.
Once you have finalized your investments and they are up and running, the next step is to monitor them. The economic environment is constantly changing and the various factors can affect the value of your investments.
While it can be challenging to monitor the investments on your own and be proactive about them, a financial advisor who is trained to do this can take this burden off your shoulders. Your advisor can assess the investments against its peers and identify the best asset allocation strategy so you are not affected by the fluctuating markets.
Too Many Choices
In the stock market today, an investor has more than 10,000 exchange-traded-funds (ETFs) to choose from. Given the vast number of options, it can be hard to decide which stocks would be a good addition to your portfolio. Moreover, if you have no prior knowledge of the stock market, this overload of information can be overwhelming.
However, financial advisors have extensive knowledge of the stock market and how it works. Based on your financial goals, they will have a go-to set of investments that they are well-versed in. Your financial advisor can also narrow down the number of options to meet your needs. As an investor, this gives you more confidence to invest in the markets.
Investing in the stock market on your own can keep your costs down and you have the liberty to pick the stocks that you like. However, as the sole decision-maker, there is always a risk of bias involved. For example, if you invested in a consumer brand stock which resulted in a loss, your personal bias will force you to stay away from companies in this industry. You may lose out on profitable opportunities in the future.
However, consulting with a financial advisor when investing in stock reduces the risk of bias. Your advisor makes decisions based on market trends and numbers. Hence, they are looking at each stock from an investment standpoint and not a personal one.
Assist With Taxes
When investing in assets, it is easy to overlook the tax that comes attached to these investments. You would need to have a bird’s eye view of your finances to get the lowest possible tax rates. In some cases, this may be as simple as choosing government incentivized asset accounts like a pension plan or Individual Savings Account (ISA).
However, for larger assets, you would require more expertise on how to get make the most of your investment and lower taxes paid. When consulting with a financial advisor, they will always have your best tax interests in mind when suggesting different investment avenues. This can help you maximize your income in capital gains instead of using your money to pay income taxes.
A good credit score is incredibly important, as it determines your eligibility to get a loan or other forms of financing. This score provides lenders with insight into your borrowing and repayment habits. The higher the score, the easier it is to get a loan.
A financial advisor can help you manage your money in an efficient way so that you don’t go into too much debt and maintain a good credit score. Alternatively, they could also suggest investments that help tidy up this credit score. It is important to be prudent about your finances from an early age so that you can gain financial freedom and not have to worry about retirement savings.
The stock market is not a gamble and you need to have your strategy down before you enter the markets. During the stock market crash of 2008, many people lost their life savings. This event highlighted the importance of diversifying your portfolio to protect yourself against losses.
Historically, a stock market crash happens every 5 to 7 years. This means you need to have a plan of action for your assets when there is a downturn in the economy. Your financial advisor can help you devise an investment strategy to protect your stocks so that you are able to weather out the financial storm.
If anything were to happen to you, you would need to rely on your next of kin to cover your expenses. Alternatively, you would need to set up a legacy plan. This is the distribution of your assets to various beneficiaries. Many people often consult their lawyer to draw up their will.
However, a financial advisor can provide information on how best to divvy up the assets and get them to the respective person. While you may have an idea on how to accomplish this, a financial advisor can help you finalize those finer details and guide you in the right direction.
Having kids can impact on your finances and may require a few adjustments to your current investments. There are many steps parents can take to ensure their kids have a secure financial future and an advisor can guide you through this process.
They can help you invest in a 529 plan, which is a college fund that provides tax incentives or assist with estate planning to protect your assets in the event of death. In addition to this, a financial advisor can also help you pick a life insurance plan that provides the best protection for you and your family.
You Get To Relax
Dealing with matters concerning money is very complex and it can be a challenge to identify ways to make the most of your income. Moreover, the markets are incredibly volatile and every investment comes with an element of risk attached to it.
A financial advisor can steer you in the right direction and help you make decisions based on your financial position. While there is still inherent risk involved in investing your money, a financial advisor can help you make more informed choices and devise a strategy that works well in the long term. You will achieve peace of mind by knowing that your money is in good hands.