When is it worth hiring someone to manage your money?


Deciding how to invest your money is a process, not a one-off decision. You can turn to books and articles for an overview, but money is personal and one size doesn’t fit all.

For example, portfolio allocation is a simple concept; the complexity comes from your age, your personal risk preferences and your occupational retirement plans. You may therefore need assistance at some or all stages of your journey.

But what is worth paying for? Here’s what to consider before hiring someone.

Understand what you need

A free and easy program where you deposit your data online offers basic advice and is great if you only have one financial goal, like saving for retirement. When considering saving for competing goals like your kids’ college education, a home, and retirement, take the time to see a professional who can help you balance your goals while creating financial well-being.

If you have a partner with additional goals, having a third party goal can be essential for setting priorities and developing a long-term financial plan. Learning together is good for your finances and your relationships

Opinion: Want a better relationship? Talking about money will help

Another reason to consider professional help is if you want someone to calm you down when the stock market goes haywire and keep you on track to meet your goals.

If you are just looking for someone to manage your money and outperform the stock market, you might want to reconsider your decision. Even the best professionals struggle to do this consistently. Beware of the fancy math tricks some use to convince you of their competence.

If you are looking for help with your retirement plan, many employers offer advice through an Employee Assistance Program (EAP), or the investment company that manages the plan may offer seminars. Pension plans have mutual fund options that are targeted to match your retirement date, which is an easy way to invest.

Know your limits as well as your strengths. Be intentional; break your money matters down into smaller decisions.

Overestimating your skills is what happened to a client who inherited $ 80,000 from a great uncle. Although he had no financial or investment training, he decided to invest the first $ 30,000 in three stocks he believed in. By the time the remaining $ 50,000 arrived six months later, that $ 30,000 had become $ 12,000. At that point, he knew he needed advice and was willing to pay for a consultation.

Dig deeper: Do you really need a financial advisor? Take this six-question test to find out

Know what advice costs and how you pay for it

Creating an account can be free, but transactions can get expensive. All mutual funds have underlying costs, but these costs and management fees vary widely; be sure to compare expense ratios as part of your research, as some charge a “charge,” or commission, when you buy.

If you hire a company to take care of your money, you will likely be charged a percentage of your assets under management (AUM). Typically, this is about 1% of your assets each year, whether your investments go up or down. Depending on how much (or how little) money you have, a company may send you to a junior employee – or refuse to take you as a customer.

A cheaper alternative could be investment companies like Fidelity and Vanguard. They will help you make a simple financial plan and suggest mutual funds. One caveat: the boards will be fairly generic, and their staff will move around, so you might find yourself dealing with someone new on a regular basis. But you might still want to think about what they have to say, especially if the first consultation is free.

Then there are the large full-service companies. Historically, what they did was clear: buy and sell stocks. Now they earn all kinds of fees and commissions when they help you. Understand that sellers have multiple titles. Be aware of the myriad of ways in which they can be compensated. Ask if you are unsure.

Depending on how much money you have or the level of service you choose, the investment advice you get may be online only. If you’ve gotten a free consultation elsewhere, perhaps from the company that manages your 401 (k), compare the recommendations.

Following: Robo-advisers give decent cheap financial advice

No matter who you are talking to, do your research before hiring a professional. Research their education, registrations and background. State and federal government websites display this information as well as if there are any complaints filed against it.

A client who enjoyed meeting a potential new broker took him to BrokerCheck and saw that he had worked for five companies in the past nine years. She wanted a long-term relationship and decided he wasn’t right for her.

Finally, most companies now charge you for transferring money to another company, so know which one you want to have a long-term relationship with.

Following: Rule # 1 when looking for a financial advisor: don’t trust anyone

Also: This DIY investor says there are 5 good reasons to hire a financial advisor

Find a trustee

If you hire a financial professional for investment advice, make sure that person is a fiduciary – a professional requirement to always act in the best interests of the client and find the best option for them, rather than the product that pays off. the more money to the investment advisor.

Although “financial planner” is an unregulated term, anyone with the title of Certified Financial Planner is a Trustee. They are trained in tax, insurance and treasury matters as well as investments. A one-time consultation can cost between $ 150 and $ 400 per hour. This is a source for finding the one who charges for services by the hour instead of getting a commission.

Read: What to watch out for – and watch out for – before giving your money to a financial advisor

Consider taxes

Just because you have received investment advice does not mean that the professional has taken your tax situation into consideration. Some seemingly sound investment decisions may not seem so good after tax. No one knows your taxes like your tax professional.

A tax professional will be especially helpful in deciding what type of pension plan is best for you and your future, or how and when to turn stock options into cash. Before making any major decisions, connect with your accountant or meet with one for an hour.

If you’re looking for an accountant, consider whether you need a CPA or an Enrolled Agent (EA) – someone who can advise you, do your taxes, and who is registered with the Internal Revenue Service but usually costs less. But if your taxes are straightforward, you can choose to do them yourself.

Also: Your financial advisor is retiring. Should we find another company?

Feeling stuck?

People overwhelmed by the idea of ​​having money or making financial decisions may want to see a financial therapist first. This approach worked for a client who suddenly lost her father. In addition to the shock of grief, she learned that she had inherited $ 75,000. She felt overwhelmed and financial decisions were one too many things.

A financial therapist who will talk about money issues, including your feelings about it and your original family history, can free you up to take your next steps. You can find one from the Financial Therapy Association.

Following: Why the best person to give you financial advice might NOT be an accountant or financial advisor

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CD Moriarty is a Certified Financial Planner, MarketWatch Columnist and Personal Finance Speaker. She blogs at MoneyPeace.

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