Is a Financial Advisor Worth the Cost?

A service from a financial advisor can cost you money — is it worth it?​

People think sometimes that with a truckload of cash, the world is at their fingertips. However, money can be finite in a certain sense and people may casually ask you what to do with what you got. If one does tell you to hire a financial advisor, it begs the question of who they are and why hire them?

General definition

Financial advisors are people trained to give guidance and advice to clients interested in finance matters. The ASIC is in charge of financial adviser accreditation exams formerly managed by the now-defunct Financial Adviser Standards and Ethics Authority; only college/university graduates with at least a year of experience in the finance industry and passed RG146 accreditation are allowed to sit the exam.

While finance management was normally tied into banks, the findings of the Hayne Royal Commission instead mandated reforms for banks to disassociate with financial advisory or management and firmly concentrate on core banking services. Current and aspiring financial advisors were required to have association memberships in relevant bodies such as the Financial Planning Association and the Association of Financial Advisers, and to undergo continuing education.

Services of a financial advisor

When enlisting the services of a financial advisor, much thought will be made on what kinds of support a client should seek, which is distilled into two types:

• General advice. A financial advisor may counsel you on certain finance matters that may or may not necessarily play into your goals. 
• Personal advice. This form of financial advice will be geared towards specific plans or goals. This may include assistance with a single issue, continued guidance, or developing a comprehensive financial plan for the client.

Situations

There are various events in life where one may see the urgency in seeking financial advice. Here are some examples:

• A person lands access to a large trove of money by legitimate means (ex. winning the lottery, significant pay raise, or by inheritance), but may be at a loss on how to make use of the windfall and even want to avoid manipulation by potential gold-diggers, especially certain relatives.
• A newly-married couple wants guidance in managing their finances going forward.
• Divorced or widowed persons trying to make sense of their financial affairs/assets as single people.
• People approaching retirement are becoming wary of how they can sustain themselves with a potential loss of regular income.
• Parents want financial security for their young children.
• People who have a good grasp of financial management and have done some investments but need professional knowledge to make things better.

Why hire a financial advisor?

Even with the above information, people may still be curious as to why they need to get a financial advisor in their corner. 

For one thing, a financial advisor would have in-depth knowledge of financial services products and the steps to achieve personal goals. Their insights will be vital for people who want to achieve a certain level of monetary security but have problems or challenges getting there.

They will also help prevent a person from committing potential money blunders. Some experts claim that while hiring a credible financial advisor can cost a certain sum in retainer fees, the return on investment will come in terms of effective management of your monies. This is true especially in cases such as proper settlement of your tax obligations, paying the mortgage much earlier and without interest, and regularly setting aside a part of your regular paycheque for finance products such as time deposits or trust funds.

It’s never too late to have some guidance even when you have a good deal of money in your hands. Your future self will thank you for it.

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