The Need for Honest Conversation with Your Financial Advisor

A financial advisor is a person who partners with you and goes the extra mile to keep you financially secure. With more and more people opting for aggressive investing these days, the need for financial advisors has also increased. According to a study, the demand for financial advisors has gone up by 12% in just five years, from 28% in 2010 to 40% in 2015. A good financial advisor can contribute to your financial plan in the following ways:

Plan the right financial goals for you
Determine the type of retirement accounts you need
Make a strategy to reduce your tax liabilities
Suggest the optimum level of investment risk for your portfolio
Determine the optimal rate of return required to achieve your financial goals
Recommend the amount you need to keep in your emergency fund

It wouldn’t be wrong to say that the smartest way to manage your money is to get professional help for making the right financial decisions.

How to hire a skilled financial advisor?

Hiring a financial advisor is a great step towards financial freedom and making sound investment decisions. However, when it comes to hiring a financial advisor, you should be careful to choose someone who understands your goals, risk appetite, and interests. A financial advisor is someone who not only advises you to manage your money but also helps you to invest it in the right stocks, accounts, or bonds. Here’s how you can pick the right financial advisor:

Get recommendations: You can ask your colleagues and peers for references. However, since everyone’s requirements are unique and specific to their earnings and goals, it is advisable to not let peer pressure influence your decision and to only pick an advisor who understands your plans.
Search online: If you are not satisfied with the recommendations around you, you can always search online. There is a myriad of options available on the web. Some people are also opting for robo-advisors these days to manage their investments. Depending on your needs and your budget, you can shortlist a few you like.
Check for reviews: To understand how dependable and knowledgeable a financial advisor really is, you can consider going through their online reviews and feedback.
Pick someone who is experienced: Experience matters a lot when it comes to choosing the best financial advisor. The more experienced an advisor is, the more knowledgeable and practical they can be.

Importance of honest conversation

When choosing the right financial advisor, it is important to pick someone you can have an honest, open, and transparent conversation with. Transparency in fees and discussing the possibility of hidden charges is also helpful. Once you’ve hired an advisor, here are some tips that you can follow to ensure an honest and transparent relationship with your advisor.

1. Examine your spending and saving habits

Examining and discussing your regular spending habits and earnings with a financial advisor can be the first step towards having an honest conversation with them. Once your financial advisor is well aware of your needs, expenses, and earnings, they can effectively come up with the right investment plan that can help you grow your money over a period of time and meet your goals along the way.

2. Discuss your future plans

The need for a financial advisor can substantially increase when you start a family. Higher education costs can require prior planning and savings in the form of 529 plans, IRA accounts. etc. Discussing your child’s future plans with your financial advisor can bring forth newer avenues of investments. Your financial advisor can suggest ways to maximize your savings, reduce taxes, and optimally save for your child’s education. They can also help you determine the right time to start saving.

3. Chalk out a retirement plan

Having a retirement plan is important. Since your only source of income in retirement is likely to be from your savings, investments, and withdrawals from retirement accounts, it is vital to understand the tax implications of each of these sources. It is also important to effectively build up a strategy to maximise your returns and account for inflation. A financial advisor can help you with all of these aspects and suggest ways to build a good retirement plan.

4. Draft an effective estate plan

One of the most crucial roles of a financial advisor lies in estate planning. Wills, trusts, probates, estate taxes, and legal jargons can be extremely complicated to understand. However, a financial advisor can guide you appropriately, highlighting the importance and implication of these factors on your estate plan.

5. Share your short term and long-term financial goals

While traditional methods of saving in the bank are one way to plan for your short-term and long-term goals, there are many other ways to generate funds for your needs and wants. Whether, you are planning to buy a house or save up for a personal expense, a financial advisor can suggest specific ways to meet your goals by investing in stocks, bonds, CDs, and more.

6. Be realistic

Being realistic matters the most when it comes to choosing a financial advisor. Remember, your financial advisor is not there to push a particular agenda, promote a service, or to examine your financial circumstances. While their job is to help you make a smart decision, the final decision always depends on you. A financial advisor doesn’t force you to do something. They merely show you the right path suitable for your current financial situation.

To sum it up

It is important to choose a good financial advisor. But it is equally important to be honest and transparent with your advisor to help them come up with the best investment and savings options for you.

You can reach out to financial advisors and leverage their expertise in financial planning by choosing a financial advisor who is exceptionally skilled and experienced.