Managing money can be a tricky task, whether you’re just trying to set a budget or set yourself up for retirement. Leaning on a professional can help.
“You lose enough and then you learn from mistakes. I went to a financial planner and never looked back,” said Chuck Droubie.
His story is one Bjorn Amundson, a certified financial planner with Quarry Hill Advisors, knows well.
“You need a financial advisor when you have some sort of a financial problem that either, you know you can’t fix yourself, or when you’ve tried to fix it yourself and you’re sitting there and not making progress,” said Amundson.
How should someone pick a financial advisor?
“When you look for a financial advisor, there is actually a couple different types,” Amundson said.
There are at least six different types of advisors, but Amundson helped boil it down to a few that stand out.
- Financial coaches help set up a budget, erase debt and improve credit score.
- Money managers give investment advice and buy, sell or manage stocks.
- Certified financial planners help optimize every area of someone’s finances including work benefits, taxes, estate planning and managing cash flow.
When is the right time to seek financial assistance?
“You should seek a financial advisor when you find you have some sort of a major life event,” said Amundson.
That could include getting married, a time when two people’s finances come together.
A sudden income increase is another reason whether it’s from a new job, a substantial raise or an inheritance.
A sudden drop in income could also be a reason to seek help.
What type of questions should they bring to the table as they try to find the right relationship?
“You should see how they’re being compensated and don’t be afraid to ask that,” said Amundson.
Some advisors charge an hourly rate, which could be around $200. Others charge a fixed fee, which could be thousands of dollars.
Amundson says to be wary of commission-based advisors. They make money by buying and selling your investments.
“If they’re receiving commissions, a lot of times that can create a conflict of interest where their incentive is to sell you a product rather than to help you optimize your finances,” Amundson said.
Dollars and cents aside, Amundson said to make sure the adviser is trustworthy.
“At times, they’re going to ask you to do things that don’t feel good and that don’t feel right. The right thing to do in COVID or in 2008 is to be investing in stocks and to be investing aggressively. That’s a really hard thing to do when the world around you is falling apart, but that’s exactly when the returns are best,” Amundson said.
Be sure to take stock of your entire financial situation before seeking advisement. Amundson says to make sure you have a cash reserve of a couple thousand dollars. After that, take a look at your debts and work towards paying some of them off to increase cash flow and financial freedom.
