When you reach the point that you are uncomfortable making your financial decisions, it may be time to call upon experts. This point may be for complex areas that you do not understand, for example, tax laws. Others reach the point when it is no longer the best use of their time to learn the complexities of financial planning. Sometimes other individuals simply do not know what to do in a difficult market.
When looking for a financial adviser, you should understand how your adviser is paid. Registered investment advisers are generally paid by flat fee or a percentage of assets under management. You may see some brokerage houses implement a similar fee structure, but the difference between a registered investment adviser and a broker is their fiduciary duty. The registered investment adviser has a fiduciary duty to put your interests first. Brokers typically have a duty to place you in suitable investments.
Depending on your financial situation, you may not need a comprehensive suite of services that includes asset management. You may only need an adviser to sit with you to develop a plan that you follow. Generally, you make an appointment for a check-up every three years or so to review your plan. Depending on the complexity of your situation and the expertise of the planner, a flat-fee plan can cost between $500 and $5,000.
Ideally, a planner should look at your estate plan. In Georgia, there is almost nothing worse than dying without a will if children are involved. It can be a tremendous waste of money and resources to obtain a guardian ad litem for the children and go through the courts to straighten your affairs out. The essence of a financial plan is knowing your family is provided for should something happen. While a financial planner is not a lawyer and cannot provide legal advice, he should be able to review your estate plan and provide you with points to discuss with your attorney. Your adviser should consider your need for life and disability insurance to protect your family and wealth.
Your financial plan should dictate what investment strategy you follow. Investing is easy when you have no direction. You simply try to buy low and sell high. However, creating a strategy and following it in a disciplined manner is the difficult part. Having a discipline that is designed to help you reach your goals helps take the emotion away from investing. It is the adviser’s job to help keep you on track during difficult or unpredictable economic conditions.
The other crucial part of the financial plan involves cash flow planning and budgeting. Your financial plan should be designed to take you from your present situation to where you want to be. Financial planners often use cash flow models to assess your future finances, plan for your future liquidity needs and explore likely outcomes using different variables. Used effectively, a cash flow analysis can help prevent major planning errors, while identifying opportunities to improve your overall financial plan.