You ask the question, I provide the answer
This comes from someone who ran a successful book of business as a Financial Advisor but also someone that had to turn away business for a variety of reasons.
Many did benefit from the services and navigation I provided. Others were purely in it to try and capture the next bitcoin.
The latter were turned away as there would never be a return on their investment that would satisfy them.
The fact you are asking yourself this question puts you ahead of the curve. Of course, your situation will vary regardless of what we talk about here but we need to dig into what you SHOULD be receiving service wise.
By the end of this, you should have an idea of what you need, and if you would like to have a review to determine your need, please schedule a consulting call with me.
Do I need a financial advisor to help invest
Want to hear something interesting?
According to Thinkadvisor “32% of Registered Investment Advisors outsource their investment management”
Chances are your advisor is not building their own portfolios which is not a bad thing at all. However, they do use the companies, funds, and Separate Management Accounts (SMA) whose sole purpose is to invest.
There are pros and cons to an advisor building their own portfolios.
- They may be very good picking individual stocks, bonds and cash allocations which if done right, may outperform your expectations
- They are able to keep costs low as these are generally purchased in a Fee-Based agreement meaning you only pay a % of those assets each year (Example: You both agree on a 1% Management Fee, you pay $833 a month or $12,000 a year).
- There are no fees outside of the monthly amount you pay (see above example)
- There is incentive for the advisor to be proactively monitoring the investments
- They typically operate under a Fiduciary Status meaning “they do what is in your best interest” (which is what they should be doing anyway)
- The advisor may have trouble staying on top of the individual investments within the portfolio in the event there are major movements, causing the potential for great losses
- There are fees on the third party investments that will reduce any gains and will amplify losses
- Lower sized accounts may not have the “economics” to benefit from a financial advisor
- Higher minimums to some investment vehicles may force you into investments that are not aligned with your risk tolerance or exposure
- Naturally, there is no guarantee these investments may perform as expected
Do I need a financial advisor for a Trust and Estate plan?
Trust and Estate are a must have for the majority of the population but most do not know where to start.
Only 33% of U.S. adults have created estate planning documents which is shockingly low.
A financial advisor can work with a client to develop a trust and estate plan that meets their specific financial and personal goals. This may involve reviewing the client’s assets and liabilities, discussing their family and personal circumstances, and identifying any potential challenges or issues that need to be addressed.
The financial advisor can provide guidance on the various options available for managing and distributing assets, such as wills, trusts, durable powers of attorney, and healthcare proxies. They can also help the client understand the potential tax implications of different estate planning strategies and recommend strategies to minimize taxes and maximize the value of the client’s estate.
In some cases, the financial advisor may work with an attorney or other legal professional to draft the necessary documents and ensure that the trust and estate plan is properly implemented. They may also work with the client to review and update the trust and estate plan periodically, as needed, to ensure that it remains consistent with the client’s goals and circumstances.
Know what a trust and estate plan is
A trust and estate plan is a set of legal documents and strategies that outline how a person’s assets and property will be managed and distributed after their death. It can include a trust, a will, and other documents, such as durable powers of attorney and healthcare proxies, which allow someone to make decisions on behalf of the person creating the trust and estate plan if they become incapacitated.
There are many different types of trusts that can be included in a trust and estate plan, such as revocable trusts, irrevocable trusts, and charitable trusts, each of which has its own unique features and advantages. The specific elements of a trust and estate plan will depend on the individual’s goals, the size and complexity of their estate, and their personal and family circumstances.
Creating a trust and estate plan can help ensure that a person’s wishes are carried out and that their assets are managed and distributed in a way that is consistent with their values and goals. It can also help avoid probate, which is the legal process of administering a person’s estate after their death, and reduce the potential for conflict among beneficiaries.
What is a Trust?
A trust is a legal arrangement in which a person, called the settlor or grantor, transfers ownership of their assets to another person or entity, called the trustee, to hold and manage for the benefit of one or more beneficiaries. The trustee has a fiduciary duty (do what is in best interest of you) to manage the assets of the trust for the benefit of the beneficiaries and to follow the terms of the trust agreement.
There are many different types of trusts that can be used in a trust and estate plan, including:
- Revocable trusts: These trusts can be amended or revoked by the settlor at any time. They are often used to manage assets during the settlor’s lifetime and to facilitate the transfer of assets to beneficiaries after the settlor’s death.
- Irrevocable trusts: These trusts cannot be amended or revoked by the settlor once they are created. They are often used to remove assets from the settlor’s estate for tax planning purposes or to protect assets from creditors.
- Charitable trusts: These trusts are created to benefit a charitable organization or cause. They can be either revocable or irrevocable.
- Special needs trusts: These trusts are designed to provide for the financial needs of a person with disabilities without affecting their eligibility for government benefits.
The specific terms of a trust will depend on the settlor’s goals and the type of trust being created. Trusts can be useful tools for managing and distributing assets, reducing taxes, and protecting assets from creditors. They can also be used to provide for children or other beneficiaries who are not capable of managing their own financial affairs.
What is an Estate?
An estate is the total sum of a person’s assets and liabilities at any given time. It includes all of the property and assets that a person owns, including real estate, personal property, financial assets such as bank accounts and investments, and any debts or liabilities that the person has.
In the context of a trust and estate plan, the term “estate” is often used to refer to the assets that a person owns and that will be distributed to their beneficiaries after their death. These assets may be held in a trust or may be subject to probate, which is the legal process of administering a person’s estate after their death.
A trust and estate plan can help ensure that a person’s assets are managed and distributed in a way that is consistent with their wishes and that takes into account their personal and family circumstances. It can also help reduce the potential for conflict among beneficiaries and minimize the costs and delays associated with probate.
Do i need a financial planner for retirement
This answer goes back to the first part of this article and you need to ask yourself these questions and you need to be honest with yourself and spouse. The short answer is that you will need one if you cannot discipline yourself with money but also no one is forcing you to use one.
- Do I invest and stick to it without taking unnecessary gamble or risks?
- Will I be able to know exactly how much my portfolio is earning in income, how much I can take out each year and the affect on my taxes?
- Am I taking social security at the right time?
- Do I have my beneficiaries appropriately set up in the event something happens to me?
- Do I make changes to my portfolio too often?
- Am i disciplined enough with money (remember, be honest)
- They will help you stay on track and hopefully be honest about the expectations
- Constantly be aware of major changes in laws, markets and research that could directly affect you
- May see trends and opportunities for you to take advantage of
- They may have access to other services that are unique to their firm and helping you to create more wealth through it
- Working with someone when times are tough can provide “peace of mind”
- You will have to pay for these services
- Advisors may leave the firm or retire, and you will be handed off to another advisor that you might not like, resulting in you having to find another person to work with
- They might move firms, which may not have the same capabilities
- Depending on your account size, you might not get the same attention as someone with significantly more money
- There might be a conflict of interest in investments
- Their level of expertise may fall short in some of the critical areas (Trust and Estate for example)
- You may experience a sense of dependence meaning you are hesitant to make any decision on your own
Tell me if I need a financial advisor
You may be feeling more confused and still do not have a definite answer so I will offer this to you.
I am no longer in this space, so I do not have any conflicts of interest.
Every case is different, but I am available to have a consulting call where we can go over a detailed checklist of items and answer the question
“Do I need a financial advisor”