Maybe you're interested in stock investment or how to set up a college fund for your kid. In these cases, you may be wandering into unfamiliar territory, so it doesn't hurt to get some professional advice.
For this month's "Money Management Tips" article, we'll talk about the benefits of speaking with a financial advisor, and what to look for.
"21% of consumers said they avoid making stock investments because they don't know how."
Advantages of Consulting a Financial Advisor
Chances are you're already pretty good at managing money. For example, if you have a baby, and want to save up for his or her future college tuition, you could open up a savings account and put $200 in it every month. However, you may not know about 529 college savings plans and how to set them up.
This is where a financial advisor can help. They know the smartest ways to save and invest money, reduce debt and prepare for the future.
The stock market offers a lot of opportunity. Robert Shiller, a Nobel Prize-winning economist, noted that the stock market has historically offered better capital gains (i.e. financial returns) than the housing market, according to CNBC.
However, knowing how to navigate the stock market without accidentally making risky investments can be tricky. A Bankrate survey found 21 percent of consumers said they avoid making stock investments because they don't have the knowledge required to do so. Here are a few areas where a financial advisor can help:
- 529 college saving plans.
- Stock investments.
- Mutual funds.
- Exchange traded funds.
Keep in mind that if you're just looking to open up a 401(k) plan, you probably don't have to hire a financial advisor. Most employers provide guidance to help you set up your plan. Speaking with an advisor is an option, but it's just something to be aware of.
What To Look For in a Financial Advisor
The ideal financial advisor is transparent, trustworthy and has years of experience under his or her belt. How do you find out if a potential advisor has these traits?
Lisa LaMarche, a Certified Financial Planner (CFP) and Certified Public Accountant, wrote an article for Investopedia detailing a few questions you should ask a potential financial advisor:
- Are you a CFP? If he or she has a CFP certification, it shows the advisor has obtained a relevant degree, acquired 6,000 hours of professional experience and adheres to high ethical standards.
- Do you offer digital tools? If your prospective advisor does, then he or she recognizes the need for accessible, affordable advice. This could save you a meeting every now and then.
- How can I make $200,000 in 10 years? You don't have to ask this specific question, but get a sense of how he or she will help you prepare for the future. Remember: The purpose of hiring a financial advisor is to be better prepared for the future.
Seeking advice from a financial expert isn't the only way to better manage your money. Check out our blog to get more financial advice and tips.