Most working people can’t afford a financial advisor when they’re just starting out, unless they start out making big bucks. Hiring a financial advisor is something that is probably more appropriate when you’re about halfway through your work life and you start seriously thinking about retirement. Before that time, it is best if you have already begun to put aside money for your retirement.
One of the scary things about the finances of most Americans today is that we aren’t even doing the basics. We’re not saving money, much less investing. Americans have a negative savings rate. We are spending more money than we are making. Many Americans are in serious debt, both credit card debt and mortgage debt. Housing sales and housing starts have declined. Housing foreclosures have risen. Many homes are mortgaged to the hilt.
One source of retirement income that has been important in the past is also in danger. Because individuals change jobs more frequently these days and/or spend more time unemployed between jobs, money in company retirement accounts gets spent instead of being transferred over to the retirement account at the next job.
At the halfway mark in your working life, if you have managed to put some money aside in savings and/or in company 401k or 403b accounts, a good financial advisor should be able to maximize how that money is working toward your retirement. An advisor can also help you to squeeze more out of your income as you move toward that retirement.
Financial advisors are available through big companies such as American Express, Vanguard, TIAA-CREF, and other financial and banking firms. If you have a relationship with a company, you can sometimes get a financial advisor at a discount. For example, American Express may offer financial advisors at a reduced rate if you have a brokerage account with them. Other brokers may offer the same service to their customers.
Because these companies have their own brokerages as well as financial products to sell, caution must be used to make sure your advisor is working for you and not for his company.
When you’re ready to work with a financial advisor, start asking around among your friends, family, and coworkers. See if you can get a few leads on financial advisors who come highly recommended by someone you know and trust. Try to find out about the advisor’s experience in the field. Has she been doing this for a while?
One of the catch-22s of financial advising is the question, “If you’re such a great financial advisor, how come you ain’t rich?” You need to interview at least several candidates to see if you are compatible with them and to get a gut feeling as to their competency and honesty. Ask them about their experience, how long they have been in the business. You can also ask for references, several satisfied customers you can talk to about the advisor’s performance.
This is a job interview and the advisor is trying to get a job working for you. It may be the most important employee you ever hire. Make him sell himself to you, convince you that he’s the best person for the job. Once you have made a decision, it is very important to stay in close touch with the financial vehicles your advisor has recommended. If you begin to sense that your investments are not doing as well as promised, consider dumping your current advisor and going shopping again. This is not a marriage, and if your employee isn’t doing a great job, you may need to fire her or him.