When your finances outgrow your expertise or a major life event has occurred, it becomes necessary to seek the personalized guidance of a financial advisor, whether you’re planning for retirement, managing a windfall, or juggling investments.
But it’s not just about wealth; it’s about your time and peace of mind. If you’re overwhelmed by tax laws, market volatility, or lack the time to do the research, a financial advisor can be your personalized guide. The real question isn’t just when to hire an advisor—it’s whether you’re ready to invest in your financial future.
This article explores the reasons to hire a financial advisor, the net worth threshold at which you should consider one, the pros and cons, the cost of hiring an advisor, and the triggers that tell you you’re ready for one.
If you’re interested in working with a financial advisor, please call ARQ Wealth at (480) 214-9572 to set up a free appointment to discuss your situation.
At What Net Worth Should I Get a Financial Advisor?
The critical question is, at what net worth should I get a financial advisor? While there’s no one-size-fits-all answer, certain financial thresholds and circumstances can help you decide.
General Net Worth Thresholds
- $100,000–$250,000 in Investable Assets: If your net worth or investable assets (cash, stocks, bonds, etc.) reach this range, it’s a good time to consider a financial advisor. At this level, your finances may become complex enough to benefit from professional management, especially if you’re juggling multiple accounts like a 401(k), IRA, or brokerage accounts. To qualify for ARQ Wealth’s Wealth Builder service, we require $250,000 in minimum asset value, or a $2,500 annual fee.
- $500,000 Net Worth or More: For individuals with a net worth of $500,000 or higher, a financial advisor is often highly recommended. At this stage, you may face decisions about tax-efficient investing, estate planning, or retirement strategies that require expert guidance.
- High-Income Earners: If you earn a high income (e.g., $200,000+ annually) but are just starting to climb the wealth ladder, a financial advisor can help you optimize your savings and investments to build wealth faster.
- Complex Financial Situations: Regardless of net worth, if you’re dealing with intricate financial scenarios—like owning a business, receiving an inheritance, or planning for early retirement—a financial advisor can provide clarity and structure.
Other Triggers to Hire a Financial Advisor
- Lack of financial knowledge: If you’re unfamiliar with investing, tax strategies, or retirement planning, an advisor can fill the knowledge gap.
- Major life events: Marriage, divorce, or the birth of a child often necessitate professional financial planning.
- Retirement approaching: As you near retirement, an advisor can help you create a sustainable withdrawal strategy and optimize Social Security or pension benefits.
- Sudden wealth: Inheritances, stock windfalls, or business sales can be overwhelming. An advisor can help you manage newfound wealth effectively.
Pros and Cons of Hiring a Financial Advisor
As with any critical decision, hiring a financial advisor comes with benefits and drawbacks. Understanding these can help you make an informed choice.
Pros of a Financial Advisor
- Expertise and guidance: Advisors possess in-depth knowledge of financial markets, tax laws, and planning strategies, enabling you to make informed decisions.
- Personalized plans: Advisors tailor strategies to your specific goals, risk tolerance, and time horizon.
- Time efficiency: Delegating financial management saves you time and reduces stress.
- Accountability: An advisor keeps you on track with your financial goals, helping you avoid impulsive decisions.
- Holistic approach: Many advisors offer comprehensive services, including investment management, tax planning, and estate planning to help you develop an integrated financial plan.
Cons of a Financial Advisor
- Cost: The cost of advisory services can be a significant factor. Advisors charge fees that may reduce your investment returns, especially if your assets are modest in value.
- Finding the right fit: Not all advisors are equally qualified or aligned with your goals. It requires due diligence to find a trustworthy, competent advisor.
- Potential conflicts of interest: Some advisors earn commissions for recommending certain products, which may not always align with your best interests.
- Loss of control: Some individuals prefer managing their own finances and may feel uncomfortable delegating decisions.
What Exactly Does a Financial Advisor Do?
Generally, a financial advisor will help you assess your current financial circumstances and identify areas for improvement.
Well-trained advisors take a holistic approach to providing advice by seeking to understand your financial goals, priorities, and life ambitions and then develop a plan with strategies to help you achieve them.
Good financial advisors follow an established process that may include:
- Establishing and quantifying your financial goals
- Assessing where you are now in relation to your goals
- Determining how much you will need to save or invest
- Developing a risk profile to determine how much risk you’ll need to take on your investments
- Developing an asset allocation strategy to match your risk profile and return requirements
- Identifying investments to include in your strategy
Financial advisors are there to help you take action and implement your plan. They have the resources and expertise to execute parts of your plan, or they may outsource certain aspects to other qualified advisors.
For many clients, the real value of a financial advisor is in their role as a financial coach. A good financial advisor is not afraid to hold their clients accountable for their goals and will help them ignore the market’s distractions to keep them focused on their strategy.
When your circumstances or market conditions change, your advisor should be there to help you make the necessary course corrections and ensure that your plan and strategies remain aligned with your goals.
Why You Should Consider Hiring a Financial Advisor
Trying to navigate the wealth-building path on your own can be costly.
A study by The Vanguard Group found that having an advisory relationship can increase investment performance by up to three percentage points. That’s not a trivial amount when you consider the impact on a portfolio over a ten-, twenty-, or thirty-year timeframe.
Consider the growth of a $200,000 portfolio at two different rates of return. At a 7 percent annual rate of return, the portfolio would grow to $773,936 after 20 years. If the portfolio gained an additional 3 percent per year, its value would balloon to $1,345,500.
According to the study, the value a good financial advisor brings to the client relationship breaks down as follows:
- Personalized, real-time coaching, keeping clients focused on their strategy, and avoiding mistakes (1.5 percent)
- Developing an investment portfolio based on client’s objectives and risk profile (0.75 percent)
- Steering the client to low-cost investment options (0.45 percent)
Financial considerations aside, there are many reasons why you should consider hiring a financial advisor:
Complexity of Financial Decisions
As your wealth grows, so does the complexity of managing it. At that point, decisions about investments, tax strategies, estate planning, and retirement require specialized knowledge. Financial advisors have the expertise and resources to help you navigate that complexity with tailored strategies and personalized advice.
Objective and Expert Advice
Crucially, financial advisors provide an outside perspective, free from the emotional biases that often influence personal financial decisions. They bring expertise in areas like market trends, risk management, and tax laws, helping you avoid costly mistakes.
Timesaving
Managing your finances can be time-consuming, especially if you lack the expertise. A financial advisor handles tasks such as financial planning, investment management, tax planning, and budgeting, allowing you to focus on your career, family, or other priorities.
Tailored Financial Plans
Everyone’s financial situation is unique. A financial advisor creates a personalized plan based on your income, assets, liabilities, risk profiles, and goals, whether you’re saving for retirement, planning to exit a business, building a legacy, or looking to fulfill your philanthropic desires.
Long-Term Wealth Building
Advisors help you develop strategies to grow your wealth over time, balancing risk and reward to achieve your financial goals. They can hold you accountable for your goals, helping you adhere to your long-term strategy.
Tax Efficiency
Tax laws are complex and ever-changing. A financial advisor can help you structure your investments and assets to minimize tax liabilities and optimize returns, potentially saving you thousands of dollars over time.
Life Transitions
Major life events, such as marriage, divorce, starting a business, or inheriting wealth, can significantly impact your finances. A financial advisor can guide you through these transitions, ensuring your financial plan adapts to your new circumstances.
Investment Coaching
Market volatility can trigger costly behavioral mistakes, like selling investments during a downturn or buying near market tops. A financial advisor can coach you through short-term distractions to keep you focused on your long-term strategy.
How to Know If You’re Ready to Hire a Financial Advisor
If you’re asking when you should get a financial advisor, consider these signs that you’re ready:
- Your net worth exceeds $100,000 to $250,000, and managing your finances feels overwhelming.
- You’re facing a major life event, such as marriage, divorce, or retirement.
- You lack the time or expertise to manage your investments effectively.
- You want to optimize your taxes, retirement plan, or estate strategy.
- You’ve received a windfall or inheritance and need guidance on managing it.
If any of these apply, it’s time to reach out to a financial advisor. Begin by researching fiduciaries with credentials such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA).
The team at ARQ Wealth holds these credentials and more. We are also happy to offer a free consultation for those interested in financial planning.
Please call (480) 214-9572 or use our contact form to schedule an appointment with our team.
Bottom Line
Deciding when you should get a financial advisor depends on your net worth, financial complexity, and personal goals. For most people, a net worth of $100,000–$500,000 or significant life changes signal it’s time to hire a financial advisor.
Failing to seek professional advice can lead to costly mistakes, missed opportunities, and an unprepared financial future.
If you’re ready to take control of your finances, don’t hesitate to reach out to a financial advisor. A qualified professional from ARQ Wealth can provide the clarity and strategy you need to achieve your financial dreams. Start today by scheduling a consultation and taking the first step toward a secure financial future.