5 Financial Challenges that Advisers Solve
What to expect from a financial adviser
You may be on the fence about whether hiring a financial adviser makes sense for you. Today, more than ever, tools are available to help people with financial challenges, particularly managing their money.
That’s great! The more consumers are educated about personal finances, the better off they may be and the less chance you’ll get ripped off by a dodgy sales scheme.
But with Google and Siri for free, is a financial adviser worth the cost? Shouldn’t you just try to read as much as you can, do it yourself, and save some money in the process? It depends.
Maybe I’m biased. I’m a financial adviser who has been practicing for 7 years. But I can’t help everyone anyhow. However, I’m not here to extol the benefits of financial advisers, but rather to provide some insight into what financial advisers actually offer, so you can make an educated decision on whether hiring one is a smart choice.
So, why would someone hire a financial adviser rather than manage their own money? Here are five problems that many consumers face that can be alleviated by hiring a pro.
5 Financial Challenges That Advisers Solve
1. Information overload
Information can empower us to make educated decisions, but it can also overwhelm us, causing “analysis paralysis.”
Information doesn’t always equal understanding, and a little information can be dangerous. The more you learn, the more you realise how little you know. This is the learning curve.
Part of a financial adviser’s job is to help you sort through a variety of information sources, tune out the noise, and make the best decision based on your finances and your personal goals.
2. Too many choices
In Australia there are about 500 super funds that you could join. About 2/3 have over $50 million in funds.
3. Too little time
If necessary, we could all learn to cut our hair, mow the lawn, or change the oil in our cars, but who really has the time? Not to mention, where is your time best spent?
Each of us has to weigh how best to spend our time. If a financial adviser frees up your time so you can concentrate on making more money at work or spending more time with your family, then that may be advice worth paying for.
4. Lack of expertise
There’s a reason a general practice physician may refer you to a specialist if you have an acute pain in your abdomen: the specialist has a particular expertise that you need. The same goes for financial advisers who work in a special niche.
Some financial advisers specialize in times of transition, like selling a business or planning for a divorce, while others focus on an industry, such as working with dentists or teachers.
5. Personal biases
Managing your own money has its advantages and disadvantages. You’re keeping costs down, which is a good thing; you may also enjoy picking stocks on your own.
But each of us has our own personal biases, and you need to be aware that yours exist. An adviser can help you recognize biases you may be overlooking.
You might make rash emotional decisions, too. It’s a known phenomenon that we humans feel the sting of losing money more sharply than we enjoy the euphoria of making money. Some investors can’t stomach the ups and downs of the stock market.
Part of what a financial adviser does is to hold your hand through those tough times in the market and help you make logical and rational decisions rather than hitting the panic button and reacting in a knee-jerk fashion that could come back to haunt you.
What's right for you?
Hiring a financial adviser is not for everyone. If you are the type that enjoys personal financial planning, has the time to do it, and the emotional intelligence to recognize your own biases, then perhaps you’re OK on your own. But if you’d rather spend your time elsewhere, or you require the specific expertise of a professional, then it may be worth considering.
It’s not an all-or-nothing decision, either; you can still manage your own money and have an adviser help with the overall picture, or hire an adviser to manage a separate portion of your money.
If you’re in debt and looking for help, a financial adviser is probably not right for you. Consider finding a non-profit debt or credit counselor instead.
To find the right adviser, start by asking family, friends, and professionals for a few names of potential experts to interview.
Ideally, you’d want someone who is experienced and seems trustworthy.
