A new statistic shows that 64% of Americans are living paycheck to paycheck in 2022. If that doesn't shock you then this will. Only 38% of Americans actually have a financial advisor. It always amazes me to see the numbers of just how many people don't seek financial help. Most people don't have a financial advisor because they arent even sure what they do. That is a problem. With the world changing so fast and the cost of living going up, you need an advisor now more than ever.
Who financial advisors work with...
There is a common misconception that financial advisors only work with high net worth individuals. I'm here to tell you that is not true. Financial advisors work with all types of individuals. Whether your just starting out in the workforce, or have been working for several years, or maybe you're retired. Financial advisors are there to help you grow and protect your assets no matter where you are financially.
What financial advisors do...
If your starting out looking for a financial advisor you might just do a quick google search and read some reviews. However what you might not know is that there are different types of advisors. I will highlight two of the most common types of advisors here and how they operate.
(RIA) Registered Investment Advisor- Have the fiduciary responsibility to act in their clients best interest.
(RR) Registered Representative - Advise based on suitability standards given the clients current investment profile.
I know, what does that even mean. To keep things simple without going into too much detail a RIA has the fiduciary responsibility to make decisions in their clients best interest. This means that they will put clients needs above all else and ensure that the clients needs are first. RR's make advising decisions based on what is known as a suitability standard. This means that they are not required to act in their clients best interest.
Services
Financial Planning
Advisors have the opportunity to understand your financial situation by discussing your financial goals. Life is always changing and so are your financial needs. Making sure that you have a plan each step of the way is just as important. Meeting with a financial advisor you are able to discuss these goals and they can help create a plan to get you on the right path to meeting your financial needs.
Investments
There are an array of investment services that a financial advisor offers. Depending on your circumstances in life, an advisor will use information that was gathered in the initial meetings to develop the financial plan. This helps determine what investment strategies are best for your goals. With a financial advisor you have access to diversified portfolios that have a blend of stocks, bonds, and etf's. This is typically done in what's known as a brokerage account, and it allows you to deposit and withdraw investments whenever you need.
Retirement Planning
We all will retire sometime in our life and planning for it can be challenging. Advisors can help assist you in taking the right steps to plan for retirement a few ways that they can help is by helping individuals save through their 401(k) or through IRA's. Here is how they can help in each of these categories specifically.
401(k)
Most companies now days offer a 401(k). A 401(k) is an employer sponsored retirement program. Meaning your employer has set up a retirement program that you are eligible to participate in. Many of these plans automatically enroll you in it when you sign up. However that's the easy part. The hard part is figuring out if you should contribute to a Roth 401(k) or a Traditional 401(k)? How much should you be contributing? What funds should you be picking? Next thing you know you're overwhelmed trying to understand what to choose and just decide to do whatever has been set up by your employer. This is where a financial advisor can add value to your retirement. By sitting down and sharing your 401(k) plan, an advisor can help walk you through your 401(k) investment options that best fit your financial goals.
IRA
If your employer doesn't offer a 401(k) then your next best bet may be an IRA. IRA is short for Individual Retirement Account, which is a retirement account that allows individuals to set aside money to grow for retirement. If you are looking to find out more about IRA's click here. Advisors can help individuals set up IRA's and they can help you decide how much you should be contributing to your Roth or Traditional IRA.
College Education Savings Plan
For individuals who have children, a 529 savings plan might be what you need. 529 college savings plans are state sponsored plans that allow for parents or guardians to contribute funds into a plan intended help pay for expenses when their child goes off to college. Financial advisors have the ability to set up these plans, so that way you can insure that you children are financially safe when they head to college.
Estate Planning
Over 60% of Americans don't have an estate plan set up. I find this one interesting because it is such an important part of the financial planning process. Protecting those assets that you have worked for your entire life is important. However, making sure that an estate plan is set up is just as important. There are two types of plans that your advisor may set up.
Will- a legal document that instructs how an individuals property and custody of minors should be handled after death.
Trust- a legal entity that ensures that all assets are distributed according to the wishes of the trustor.
Advisors may recommend either of these depending on your circumstances. Although Trusts and Wills are different from each other, both documents insure instructions on what to do with assets upon death.
Where do you stand?
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