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When is it Time to Hire a Financial Advisor?

Hiring a financial advisor can be a very important decision on your path to financial independence. There are many financial professionals out there with varying certifications, areas of expertise, and fiduciary responsibilities. 

Let’s talk through some situations when it might make sense to hire a financial advisor and how that decision could benefit you.

Change is inevitable

One of the few guarantees in life is the guarantee that things will change. Most of us experience change in some form on a daily or weekly basis, usually in very small doses. Every so often, a big change occurs in our lives. These big changes can be thought of as a transition point in life.

Transitions take many different forms and are often an important time to seek out a financial advisor. Sometimes these transitions are happening in our own lives, and other times we experience transitions through a family member or a close friend. Below are some common transition points when one might hire a financial advisor:

  • Getting married
  • The birth of a child
  • Becoming disabled
  • A death in the family
  • Retiring
  • Going through a divorce
  • Selling a business
  • Experiencing a windfall such as an inheritance or winning the lottery

With each of these transitions, one chapter closes as another opens. These can be very emotionally difficult, exciting, or confusing times. This is where a trusted financial advisor can make all the difference.

A financial advisor can help you separate emotional decisions from financial decisions. They can help you take a look at how each decision is going to impact the bigger picture, enabling you to zoom out during a challenging time. A trusted advisor will also help you identify exactly which decisions need to happen now, and which can wait for another day. They will prioritize action items to guide you through your transition. Often, a financial advisor will coordinate with the other professionals in your financial situation, working closely with your accountant or attorney as needed. 

While a trusted financial advisor can provide peace of mind during a life transition, there is also a case to be made for hiring a financial advisor before you are experiencing a difficult or challenging time.

Proactively hiring a financial advisor

While transitions are the typical point at which someone decides they might need to hire a financial advisor, I think there is a case to be made for proactively establishing a relationship with a trusted professional, before you are in the throes of change.

Let’s consider the example of soon to be parents. They might realize shortly before their child is born that they need to purchase life insurance. This will prompt them to seek a financial advisor, specifically around the conversation of life insurance. They will find an advisor that is solely focused on selling them a life insurance policy, and a purely transactional interaction will take place. Not bad, but let’s take a look at another option.

On the flip-side, if the parents-to-be were already working with a financial advisor, they would be having a handful of important conversations as they approached the birth of their new child. They would discuss cash flow changes – a new baby will come with some added diaper expenses at the very least, and the potential of one or both spouses adjusting their income as they spend more time at home. They would discuss the possibility of setting up a college savings plan, look at the most efficient way to pay for the upcoming medical expenses, and of course, discuss the importance of life insurance.

By working with a trusted, holistic financial advisor before they enter into this major life transition, these parents would be well-equipped to navigate the exciting moments to come. They would have an understanding of the impacts on their financial situation as a whole and would be more confident and secure in their plan. 

Know what to look for

When searching for a financial advisor, it\s essential to know that there are currently no restrictions on who can call themselves a “financial advisor”. This may change in the coming years, but for now, you must know exactly what to look for when hiring a financial professional.

The most important thing to look for is a financial advisor who holds the CFP® designation. This designation ensures that your advisor is held to the fiduciary standard, meaning that they are required to act in your best interest at all times. This means you can rest assured knowing that your financial advisor’s recommendations are solely to benefit you and your situation – without worrying about any hidden conflicts of interest.

Also, by holding the CFP® designation, your advisor has gone through years of financial planning coursework, and a rigorous, comprehensive industry exam. 

Final thoughts

Most people will wait to hire a financial advisor until they are experiencing a major life transition, such as divorce, a death in the family, or the sale of a business. While this is a valuable time to hire an advisor, who will help you separate the emotional decisions from the financial decisions, understand the bigger picture, and prioritize a plan of attack – it can also be valuable to engage an advisor before you are navigating a difficult situation. 

If you choose to proactively hire a financial advisor, you will benefit from the continued advice and holistic view that they can take of your financial life.

When searching for a financial advisor, make sure you find a CFP® professional, with experience in situations similar to yours. This will ensure that you get quality advice, from a trusted professional, that is in your best interest at all times.

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