Is 1% Too Much for a Financial Advisor?
Without a financial advisor, a newbie in the market is practically dead in the water, as their sole purpose is to guide you through the ups and downs in the many markets and industries you’re invested in.
They’re like a guide to your long and short-term goals when it comes to finances, and their help is invaluable no matter the amount of experience you may have as an investor.
However, no financial advisor will work for free, and even the smallest piece of advice could cost you, with the average price being 1% on a yearly basis.
That being said, this rate does tend to go down the more you work with your advisor, but in a way, you’re still spending money, although you shouldn’t consider it as such.
A financial advisor should be considered as nothing more than yet another investment, and oftentimes, it’s the most valuable one you’ve got.
The scope of the work
In general, a financial advisor’s job is to save you money and help you grow it with clever, well-timed, and intent-driven investments.
An investment that was made without an end goal in sight is an investment that’s bound to fail, as you’re instinctively going to devote less of your time and attention to it.
The work of an advisor varies based on what field they’re used to working in, and you may encounter advisors who specialize in comprehensive financial devices or advisors who can give you investment advice and point you in the right direction.
A CFP’s job is usually to prepare you for retirement and give you a general idea of the funds you’ll be working with once you actually choose to retire.
This also includes assisting you with your investments in a way that will allow you to retire at your preferred age rather than when you’d normally have saved up enough.
Is it worth it?
To put it simply, yes.
In fact, a good financial advisor is worth a fortune, as they’re usually the one thing standing between you and some major losses, that is unless you’re experienced enough to offset them yourself.
Your advisor is tasked with helping you grow your money, and they’re easily worth at least 5% of your total yearly earnings.
On average, a good financial advisor will lead you to a consistent return of around 12%, in which case, the 1% payment rate is a real bargain.
Of course, gauging whether this is worth it or not is far more difficult for someone who’s never worked with an advisor, so you may want to check their track record before opting for the first one that comes along.
How high is too high
This can be a very subjective topic and will fully depend on the type of relationship you’ve established with your financial advisor.
If the returns you’re getting are much greater than the fee you’re being charged, then it’s obvious that you’re getting your money’s worth, but if you aren’t, then it may be time to find a new advisor.
Essentially, 1.5% could be too much if you’re forced to work with someone who hasn’t got a clue what they’re doing, as they’re going to cost you a lot of money in the long run.
Staying around 1% is standard, but won’t get you any of the high-end advice you’re looking for, meaning that you may have to dish out a lot more to get a higher-quality advisor on your team.
Weighing between a high-quality service and an affordable one can be tough, even for the most seasoned investor, and it’ll take a lot of time before you perfect this.
Can you do it on your own
Of course, you could just set off into the world of financial management all by yourself, and while you may see some success, you may still lack the experience to make it in the long run.
A bit of education on the matter won’t hurt, and you can find thousands of resources online to help you manage your finances without anyone else’s help.
Online courses can get you really far, but the only real way to test your skills is to give the market a shot, and if you’re able to consistently make good calls, it means you’re on the right track.
In fact, you could even turn financial advice into a career yourself, earning money while also having the skills to manage your own finances at the same time.
Your financial advisor is the most valuable person in your life if you’re trying to work with money, as their skills will determine how much you’ll gain and lose in terms of reaching your financial goals.
The standard rate for financial advisors sits at around 1% of your yearly returns, but a good financial advisor is worth at least 5 times as much, and once you realize this, you’ll come to know the value of one.