The Huff Post -- If you’ve thought at all about your financial future, you might be wondering how to create a long-term plan to reach your goals ― and stick to it.
A financial advisor ― the umbrella term commonly used to refer to financial planners, though it includes other financial professionals as well ― could be just the person to help. But before you scoff at the idea, know that working with a financial advisor is not as cost-prohibitive as it once was. In fact, it could be time you hired one.
Financial planning services are more accessible than ever thanks to fee-based payment models.
“So many people feel that they don’t have enough money for a financial advisor,” said Angela Moore, owner of Modern Money Advisor in Miami. “The industry has promoted this fear by primarily focusing on high-net-worth clients who, generally speaking, have at least $1 million in assets to invest.”
As payment for their services, financial advisors will charge these types of clients around 1% of assets under management, or total portfolio value, each year. So a $1 million portfolio, could require an annual fee of $10,000. That’s usually in addition to hourly work.
The good news, according to Moore, is that there is a growing number of financial advisors who provide fee-based rather than asset-based payment models, which can take the form of a monthly retainer, hourly rate or flat rate, depending on the service. This opens the opportunity for people of varying backgrounds and income levels to seek professional financial advice they can actually afford.
“The financial field has expanded a lot,” said Britton Gregory, certified financial planner and principal of Seaborn Financial in Austin, Texas. Over the last several years, he explained, there’s been a rise in financial planning networks that focus on nontraditional markets ― in other words, “people who don’t have gobs of assets sitting around in investments,” Gregory said.
In fact, many financial advisors these days offer low-cost consultations that can help clients get pointed in the right direction, even if they don’t have the income or assets for more comprehensive portfolio management. For instance, Gregory offers “office hours” during which prospective clients can book a 90-minute video conference to discuss their questions and come up with action items. The service costs $450.
Of course, that’s nothing to sneeze at. But for someone who can’t afford to pay several thousand dollars for a comprehensive financial plan, it could be well worth gaining some professional insight.
Not sure if you’re ready to ditch the DIY route and work with a professional? Here are five signs it’s time.
1. You’re young and not sure where to start.
According to Bradley Nelson, president of Lyon Park Advisors in Rossville, Indiana, a good financial plan makes the most difference when adopted early in life.
That’s because it’s much easier to start investing 20 percent of your income when you’re young and want to retire in 40 years than to start saving 50% of your income when you’re older and want to retire in 15 years.
Young people with their first “real job” and salary stand to benefit most from good financial planning, Nelson said. “Investments scale surprisingly well. There’s really not much a person needs to do differently with a $100,000 portfolio than a $10,000,000 portfolio.”
However, young adults who don’t yet have much money to their name ― and might even be working on paying off debt ― should be sure to work with the right type of planner. “They may have to seek out a planner who works on fixed retainer rather than on a percentage of assets,” Nelson noted. An hourly fee-based planner is also a good option.
2. You experienced a major life event such as graduation, marriage or having kids.
Any time a major life event occurs, there is a financial impact. For instance, getting married means merging finances with your partner. Having a child means you have to plan for their future education costs.
“I believe that looking for professional financial help should be based on life events and personal comfort level rather than any particular level of assets or income,” said Mike Zung, the owner of Java Wealth Planning in Lee’s Summit, Missouri. He said that even someone who has just graduated from college and landed their first job would benefit from personalized help with debt management, budgeting tactics and basic advice on their company’s 401(k) plan.
“Typically speaking, the life events just keep coming from there. Marriage, buying a home, starting a family, changing jobs, kids going to college ― all these have financial implications and would benefit from unbiased financial planning,” Zung said.
3. You just can’t find the time to manage your money on your own.
Another reason to work with a financial advisor is because you don’t have the time (or know-how) to critically examine your financial life and put a plan in place.
“I’m working with some of the smartest people in the world, but unless they make time to look at their finances, things could be overlooked,” said Kayse Kress, a certified financial planner merging her firm with Physician Wealth Services, a financial planning firm based in Las Vegas that specializes in assisting medical professionals.
“No matter how smart or how much money you have, sometimes money just isn’t your thing. A financial advisor can help you create a road map to keep your financial life on track,” said Kress.
4. Financial issues keep you up at night.
If you’re staying awake each night, worrying about issues like cash flow, saving for a goal, covering loan payments or a change to your family situation, it’s time to reach out to a professional financial planner, said Louise H. Bryant, a certified financial planner and owner of the firm Financial Spyglass.
“We aren’t born with this knowledge. While all of us are capable of figuring it out, working with a financial advisor can get you on the best track fastest,” Bryant said.
5. You have at least $500,000 in assets and want a comprehensive plan.
Finally, if you do have quite a bit of money saved and you want ongoing help managing and growing your wealth, a more traditional financial planner could be a great fit. “If you have at least $500,000 in assets, you should have little problem finding a financial planner who will advise you for a percentage of [assets under management],” said Gregory.
How to choose the right financial advisor
Clearly, there are a lot of options out there when it comes to hiring professional financial help. But when it comes to finding the right person, how do you even start?
Figure out what you can afford, then find the best match through a financial planning network.
Whether you want to get a basic plan in place or hire someone to provide ongoing guidance, working with a financial planner can be a smart move. However, the cost to hire a professional has a pretty wide range, depending on the financial advisor.
It’s common to pay anywhere from $500 to $2,500 for a full financial plan from a traditional financial planner, and 1 to 2 percent of assets under management for ongoing portfolio management. Hourly fees for ad hoc consulting (such as estate or tax planning) or special projects can typically range anywhere from $100 to $400.
To find a financial advisor that meets your needs and budget, it can be helpful to take advantage of financial planning networks. The Garrett Planning Network, XY Planning Network and Alliance of Comprehensive Planners all offer online tools that let you search for advisors based on location, specialty and more.
Make sure the financial advisor is a fiduciary.
You also want to be sure that the person you work with has your best interests at heart.
“Hiring the wrong professional could be a costly mistake,” said Nelson, noting that at minimum, the financial advisor should be a fiduciary who is legally required to put the client’s interests first.
“Many planners and brokers who aren’t fiduciaries work on commission and are in business to sell you whatever makes them the most money,” said Nelson. It’s for that reason that you should look for someone who is fee-only, meaning they don’t make money from commissions or by selling products. You might also want to look for financial advisors with professional designations, such as a certified financial planner.
Or visit an accredited financial counselor.
If you aren’t so much interested in putting together a comprehensive financial plan as getting some basic personal finance advice, you might benefit from working with an accredited financial counselor instead. AFCs are certified by the nonprofit Association for Financial Counseling and Planning Education and can help you navigate confusing financial issues such as budgeting, paying off debt and saving for retirement. They’re not allowed to give you specific investment advice, but they can help you with gaining financial literacy.
AFCs often focus on working with middle- and low-income clients, so you might find this option to be more affordable than hiring a financial planner. You can visit the AFCPE website to search for a counselor near you.
Consider a robo-advisor.
If your goal is to find budget-friendly, no-frills portfolio management, a robo-advisor might be the best choice for you. These automated investment management services, which employ algorithms that choose your investments based on a few personal factors and then manage them with little human oversight, charge around just 0.25-0.5 percent of your portfolio value annually. Popular robo-advisors include Betterment, Wealthfront and Personal Capital.
No matter what type of financial advisor you choose, the point is that professional financial help is more accessible ― and more important ― than you might think. “Everybody should have a financial plan that articulates their financial goals and describes in detail how to meet them,” said Nelson. If you can’t prepare one yourself, it’s probably a good idea to hire a professional to do it for you.
For one, it takes quite a bit of time to stay up to date on the latest developments in areas such as investing and taxes. Plus, it takes discipline to stick to a plan. “There are also strategies to optimize your spending, saving, giving and investing that many people won’t think of without experienced assistance, or at least without spending a lot of time doing independent research,” said Nelson.
So don’t write off financial planning as a privilege reserved only for the wealthy. There are plenty of financial advisors out there who specialize in working with clients who don’t have a ton of money ― yet. The goal is that by working with one, you’ll put a plan in place today that ultimately gets you to the next level.