Seeking professional financial advice can unlock significant benefits, even for those feeling financially secure.
Let’s delve into 11 specific instances where expert financial guidance can positively impact your life. Before we do, keep this in mind:
Many people turn to financial advisors to manage their investments, often driven by a desire for simplicity or because they have limited time and energy. If you choose this route, ensure your advisor is a licensed fiduciary. Why?
Because it’s the difference between consulting with a licensed doctor (bound by ethics and legal standards to provide the best care) versus a self-acclaimed medical expert. Or, a licensed electrician versus a DIY enthusiast, the latter potentially putting others at risk.
When to Hire a Financial Advisor
There are 11 key instances when hiring a financial advisor pays dividends, including when you need to:
- Determine Your Retirement Readiness (i.e., Are you on track financially to retire?)
- Transition Into Retirement
- Weather Life’s Financial Storms and Challenging Life Events
- Mitigate Investment Tax Burdens
- Support Aging Parents
- Maximize Gains From Business Sales
- Optimize Insurance Coverage
- Leverage Financial Windfall Benefits (e.g., Inheritance, Lottery, Settlements)
- Reduce Financial Stress
- Navigate Complex Financial Events (e.g., insider stock sale, private equity)
- Avoid Annuity Pitfalls (e.g., hidden fees, guarantee limits)
Let’s dive deeper into each point, then wrap up by describing how to vet a financial advisor.
#1 Determine Your Retirement Readiness (i.e., Are you on track financially to retire?)
Even people flush with cash ask these questions: Am I on track to retire comfortably? Am I taking enough risk or too much risk? Is there enough for my children and grandchildren?
The answer to: Are you on track to retire—depends on:
- Your Goals
- Current Savings
- How Much Longer You’ll Work and Save
- Social Security Claiming Timing
- If You’re Expecting an Inheritance or Other Income
- Planned Retirement Expenses, Including Health Care Costs
- Unique Financial Circumstances (e.g., child with special needs)
- Risk Tolerance
- Longevity Risk
- Market Performance and Compound Interest
Once this information is identified, a financial advisor can apply sophisticated financial modeling scenarios with guardrails, ultimately providing you a clear answer.
Once informed, you’ll likely experience a sense of relief. Knowledge is reassuring.
Resource: Philosophically, how much is enough?
#2 Transition Into Retirement
The financial decisions you make during the immediate years before retiring and the initial retirement years, are key to help ensure lifelong income.
How you structure and draw upon your assets are critical components to help your money outlive you, coupled with tax optimization and good budgeting (link downloads our budgeting worksheet) throughout your retirement.
The process of making your money outlive you is an individualized one. No one shares the same situation.
Similar, sure. Yet, there are differences and, therefore, it’s important for you to have a financially-optimized retirement plan specific to you.
If you’re unsure about your approach, seeking professional financial advice can be a game-changer, even for the most self-reliant individuals—especially if you’re asking yourself the following questions:
- How do I pay myself in retirement?
- Do I withdraw first from my IRA, 401(k) or brokerage account?
- Should I do a Roth conversation now or wait another year to save on taxes?
- Will delaying Social Security increase my tax burden, or should I claim early?
Many people don’t realize how much money they can save through strategic retirement withdrawals.
Resource: Prolonging Retirement Income Checklist
#3 Weather Life’s Financial Storms & Challenging Life Events
Birth, death, divorce, job loss, marriage and other life events can significantly impact our financial situations.
For example, when a spouse passes away the surviving partner is often left to navigate complex financial decisions, including estate settlement, insurance claims and potential changes in income and expenses. (Divorce often creates similar challenges.)
An advisor can help you understand the financial impact of the loss, redesign a financial and investment plan, explore income options, and minimize estate and investment tax impact. Most life events have financial implications.
It goes without saying that you can’t predict the future, but you can plan for it—alleviating unexpected costs and stress.
However, even the best-laid plans fail. This is where a financial advisor can be invaluable, offering a comprehensive view of potential financial outcomes.
#4 Mitigate Investment Tax Burdens
Many individuals unknowingly miss out on significant tax savings from their investments. A knowledgeable advisor can help you minimize taxable investment events.
Therefore, a key question to ask an advisor you’re vetting is: How do you improve after-tax returns? Ultimately, an advisor should help you keep more of what you earn through investment tax optimization.
Resource: A Disciplined, Research-Driven Approach to Investment Success
#5 Support Aging Parents
As parents age, their financial needs become increasingly complex. Ultimately, they may need your help navigating long-term care, estate planning and managing health issues.
Financial advisors can help alleviate the stress of caregiving by helping you understand the costs, tax implications and legal considerations, with the key goal of strengthening your parent’s financial well-being.
Also, an advisor can be a neutral party between you and your aging parents. This can be helpful when there are tensions or disagreements about financial matters. Advisors are trained to communicate effectively with people of all ages and backgrounds, helping to bridge generational gaps in financial expectations and knowledge.
Are you experiencing this yourself? If so, know you’re not alone.
According to the Pew Research Center, about 32% of all adults with a parent age 65 or older have given a parent financial support in the past 12 months. What’s more, among all adults with at least one child age 18 or older, nearly 63% have provided at least some financial support to a grown child in the past 12 months.
Feeling financially squeezed between your aging parents and young adult children (aka the sandwich generation) is a challenging place to be. An advisor can help you balance the needs of your family with your own financial needs and goals.
It’s a delicate balance, helping others while also being responsible to yourself.
#6 Maximize Gains From Business Sale
Selling a business is a major life event, and maximizing your returns is crucial. A financial advisor can be a valuable asset in this process.
By identifying tax-efficient strategies, such as structuring the sale to minimize capital gains taxes or utilizing tax-loss harvesting, advisors can help you keep more of your hard-earned money.
Additionally, they can provide expert guidance on investing the proceeds to help ensure your wealth continues to grow.
#7 Optimize Insurance Coverage
As you age and life circumstances change, so too should your insurance needs.
For example, you may no longer need a life insurance policy if your dependents are now financially independent and your estate can cover your final expenses.
Alternatively, if you’ve taken on more financial responsibility (e.g., larger mortgage, second home, expanding family), then you may need more coverage.
An advisor can help you determine if your current policies are still necessary and if they provide adequate coverage. They can also guide you through assessing long-term care insurance costs and the financial impact on your estate.
#8 Leverage Financial Windfall Benefits (e.g., Inheritance, Lottery, Settlements)
A sudden influx of wealth, such as an inheritance or lottery winnings, can be both exciting and overwhelming.
Also, when you’re cash flush, it’s easy to mismanage funds and make impulsive decisions.
A financial advisor can help you navigate this significant life change by providing expert guidance on asset protection, tax planning, and investment strategies.
#9 Reduce Financial Stress
Many of us dream of financial freedom: the ability to retire comfortably, send our children to college, or pursue passions without worrying about money.
While financial planning can significantly contribute to these goals, it can be time-consuming and complex.
If you find yourself overwhelmed by the intricacies of investing, retirement planning, or tax strategies, a financial advisor can provide the expertise and support, freeing you from feeling stressed or unsure.
Additionally, if you feel a constant undercurrent of financial unease, an advisor can help alleviate this worry. They can provide clarity and a customized plan to address your specific financial concerns.
#10 Navigate Complex Financial Events (e.g., insider stock sale, private equity buyout)
Some financial events can be complicated, resulting in hidden ramifications.
For example, an insider stock sale or trade typically has significant tax implications. Timing is also critical and dependent on many factors, including market conditions, your company’s performance, and personal financial goals.
By seeking advice from a financial advisor, executives, directors, and others can make more informed and strategic decisions about when and how to sell their insider stock, helping to protect your wealth and avoid potential financial risks.
Similarly, if your company is offered a buyout, an advisor can help you analyze the terms and understand the financial implications of the offer, including the payment structure and tax implications.
They can also help you with cash flow analysis and provide an overall investment strategy, coupling your current financial situation with the offer.
#11 Avoid Annuity Pitfalls (e.g., hidden fees, guarantee limits)
There are (some, though few) legitimate reasons to purchase an annuity. (We don’t sell them.)
A key annuity sales pitch is, “You’ll receive guaranteed lifetime income, with no worry regarding market fluctuations.”
This could be true. But what’s also true, is that your investment portfolio can be structured in such a way, as to act like an annuity—without the added costs and restrictions of buying one.
Therefore, if someone is trying to sell you an annuity, have a licensed fiduciary review your contract before signing. An advisor can tell you if there are hidden costs and if the product makes financial sense.
Vetting a Financial Advisor
When you’re ready to hire a financial advisor, look for the following qualifications:
Licensed Fiduciary: To be a licensed fiduciary, the individual must pass the Series 65 securities exam.
Fee-Only: Hire a fee-only advisor who is truly independent, avoiding potential conflicts of interest associated with commission-based business models.
Experience: As I said at the start, you wouldn’t hire an unlicensed doctor to operate on you. The same is true for hiring someone who’ll advise about your life savings. Hire an advisor who is licensed and legally required to put your best interests first.
No-Risk Assessment: It’s important to access an advisor’s expertise, communication style, and overall fit—at no cost to you. A reputable advisor will offer (generally two) complimentary consultations, giving you time to ask questions and ensure the advisor’s investment philosophy and approach align with your needs.
Final Thoughts
Whether you’re planning for retirement, already retired, navigating a life change or simply seeking financial peace of mind, a financial advisor can make a significant positive impact in your life.
At a minimum, a qualified advisor can help you reduce stress, save time, optimize investments, and avoid costly mistakes, leading to greater financial success.
Ultimately, many financial goals are within reach, but taking the right steps is crucial.
About David Bunker
With more than 25 years of experience, Dave works as a financial advisor and is a licensed fiduciary.
He founded Windsor Wealth Management based in Topsfield, Mass., a fee-only retirement planning and investment management firm serving business owners, executives, families, and retirees north of Boston and beyond.
Dave holds a master’s degree in finance and financial management services, and a graduate certificate in financial planning from Bentley University, and a bachelor’s degree in finance from Syracuse University.
His mission is to help you achieve your financial goals and live your best life. His clients enter retirement knowing how much they can spend and have a tax-efficient strategy to draw on their savings during retirement.
Dave loves finance and welcomes your outreach.
For answers to frequently asked questions, explore A Guide to Working with Windsor Wealth Management.
This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.