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Sunday, September 25, 2022

Do you need a financial advisor before the end of the year? Here’s how to know for sure

Have you ever wondered what went well and what went wrong with your finances this year? Do you need help from a financial advisor?

Epoch Times Photos
Melissa Brock

Suspect that you may need a financial advisor or financial planner? The decision to add a financial advisor to your “team” can depend on many reasons, both personal and practical. The end of the year may be the right time to find a new team member.

In a CNBC and Acorns Invest In You Savings Survey, most Americans surveyed reported that they manage their finances without the help of professional or online services. The survey found that 75 percent of Americans manage their money – only 17 percent manage their money with the help of a financial advisor. In terms of age groups, a total of 31 percent of Americans 65 and older use a financial advisor, compared with 4 percent of Americans 18-24 and only 7 percent of Americans 25-34.

Let’s take a look at what financial advisors do, why you should seek help from a financial advisor before the end of the year, and what type of financial advisor might be right for you.

How can a financial advisor help at the end of the year?

Working with a financial advisor at the end of the year can be a good time to assess what worked and what didn’t this year. Are you often short of money to pay your monthly bills? Is your debt burden growing? Have you identified specific goals for the past year to ensure the stability of your family in the future?

A financial advisor can help you quantify these goals. For example, suppose you have a baby this year and want to start saving money for college. A financial advisor can help you calculate how much you need to save per month to meet your college savings goals.

Whatever important life decision you make on the horizon, a financial advisor can help you develop a plan. Your financial advisor will consider a number of factors, from your salary to your time horizon, to help you make the right money choice.

Reasons to get a financial advisor before the end of the year

Your finances can get complicated every year. You may be thinking about moving to next year for the following reasons.

Reason 1: you’re new to financial decision making

Do you understand the basics of investing? Working with a consultant can lay the foundation for future success. You may only need to hire someone temporarily while you get used to making decisions about your future. You may not need a financial advisor forever – you just need one to help you move in the right direction.

Reason 2: you went through a big life event

This year, did you get married, have a baby, get divorced, or survive the death of your spouse? Each of these life transitions requires careful financial planning. You may need more than just financial advice; you may need someone to help you determine the best financial course of action. For example, your spouse may have died and left you a lot of money on your life insurance policy. A financial advisor can help you determine a balanced asset allocation across your various investments so you can take care of all of your needs, whether it’s saving for retirement, a college plan, a short-term budget, and more.

Reason 3: you receive or plan to give a large amount of money

During the holidays, families often make generous donations to their loved ones. You may receive an unexpectedly large amount of money that may be taxed by a financial advisor.

You can also plan to give your family members a large sum of money during the holidays. A financial advisor will assist you with gift and inheritance tax exemptions. You want to know the total amount you can pay in excess of the annual exemption amount, during your life or in the event of death, before you have to pay any federal gift or inheritance tax. You might want to come up with a comprehensive donation plan for the many upcoming holidays.

Financial counselors can also help you plan your property in the event of death, which is important if you are married or have children. A financial planner and a lawyer can help you figure out what will happen to your money and property if you die.

Reason 4: you need help managing year-end debt

The end of the year can be a great time to reflect on how well you are handling your debt obligations. If you are facing a difficult debt situation, such as outstanding credit card debt or medical bills, a financial advisor can help you overcome the hurdles. You can also discuss your personal debt situation with a financial advisor at your company. These sessions are often free. Check with your company’s HR department for more information on when you can sign up for a time for financial workplace planning.

Reason 5: you will get a promotion or promotion at the end of the year

If you’ve received a promotion or promotion at work, you might want to talk to a financial advisor about how to deal with your salary spike. A financial advisor can help you determine how to responsibly respond to a pay increase and help you plan for further growth in your wealth.

What type of financial advisor should help with year-end planning?

What kind of advisor do you need? You can get a consultant with many certifications. There are three types of financial advisor certifications that you may want to consider:

  • Certified Financial Planner (CFP): CFP professionals meet rigorous standards of education, training and ethics and can advise you on a wide range of investment and tax advice. CFPs must have worked at least 1000 hours before they are certified.
  • Chartered Financial Consultant (ChFC): ChFCs do not have to pass the same level of testing as CFPs, but they must meet strict standards and have three years of experience in the field before being certified.
  • Certified Public Account (CPA): CPAs help individuals and companies with financial planning, investments and taxes. They must fulfill certain educational and work requirements and pass an exam in order to obtain a certification.

You should always be sure that your financial advisor is a trusted person. By law, trustees are required to put your financial interests ahead of their own financial gain. Some financial advisors have a paid structure and make money by selling certain financial products to their clients. If you want to avoid this, make sure that your advisor is on the list of proxies. Visit napfa.org to check the fiduciary database.

Also, you want to know how financial advisors get paid for their work. Many advisors charge an hourly fee, and you should also expect the financial advisor to charge an annual fee, such as 1 to 2 percent of your investment.

Need some good advice before the end of the year?

You may be wondering how to find the right advisor. Ask your family, friends, and colleagues. They may already be working with a fantastic fiduciary financial advisor right in your city.

Before making your final decision, make an appointment or phone calls with a couple of potential consultants. You need to be sure that your advisor agrees with your personality and understands your financial goals.

Tidying up your finances right now can put you in a great position before your New Year decisions take effect.

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