Hiring a financial advisor is not among the everyday decisions people make. Many people even find the idea of hiring an advisor absurd, they feel like a portion of their money is getting wasted but that is not the truth. The increase in the net worth of an investor’s portfolio has seen approximately 3% increase on an average per year. What initially seems as an expense may actually prove to be a sensible decision with time as the stocks hold their position in the market. Financial advice comes for a considerable cost i.e. 0.5 to 1 percent of your total portfolio investments per year. With such an amount paid as a fee, every investor would want to know if hiring an investor really worth it?

Here are Piggy’s insights on is hiring an advisor really worth?

Firstly, let us go through a checklist. If all of the boxes under this checklist ticked for you, then you do not need a financial advisor. Have a look;

  1. Is your retirement covered?
  2. Do you have an accurate financial plan for your retirement that ensures monthly income and some saved corpus for rainy days in your golden years?
  3. Are you insured? Is your car, home, family insured?
  4. Are you debt-free?
  5. Are your taxes planned? For income as well as estate?

This 5-question check-list more or less covers all the major concerns of an individual’s life. If you are an investor and have ticked all the 5 questions, then congratulations you do not need a financial advisor.

You have done appropriate budgeting of your family finances and correct allocation of assets keeping in mind the needs of present and future. But if even one of the boxes is left unchecked, you need to re-think about your finances.

According to research conducted by Vanguard, your portfolio can experience around 3% hike when a couple of best practices are followed. This effect is called the ‘Advisor Alpha’. If your advisor works in alignment with your long-term financial goals and follows the best-practices as framed by the experts, you will always thank yourself for hiring an advisor.

Apart from the above checklist, there is another category of investors who do not need an advisor, they are self-directed investors or the people who do not need external direction in order to make decisions. These people are highly savvy with the market norms and enjoy trading and playing with their money. Their financial speculations are commendable and have their retirement planned.

What backs their decisions and speculations are an array of rules and disciplines which they follow by-heart in sync with their long-term strategy. But this quality is only in a handful of people. For the rest us, algorithms and speculations have always been a tough game. To our relief, there is help available out there- the financial advisors.

Along with so many suggestions they put upfront to investors, the best thing they do is bring about a change in the attitude of the investor. Like life coaches, financial advisors also play the role of behavior coaches in personal finance. A counter-productive behavior does much more harm than a good done by productive behavior. An advisor who knows about your goals and financial aspirations is familiar with the what triggers your impulses and knows your investments behavior can always coach and rectify it for the better.

A few factors which an investor needs to consider while going for an advisor are:

  1. Fee

Nothing comes for free, nor does financial advice. The advisor will charge a fee against the valuable advice he/she provides for your money. What you need to consider is how is the advisor charging that fee and how much. Be well researched regarding the fee structure other advisors in the market charge so that you can be in a position to compare and negotiate if desired.

  1. Spectrum of advice

Before you get engaged with an advisor, make sure you touch every aspect of advice you seek from them. there may be advisors who specialize in one thing like financial planning or portfolio management or retirement planning, etc. You have to list out things you seek from them so that nothing is left undisclosed for future.

This will not only help the advisor understand your expectations better but also help you to be much clear about your aspirations.

  1. Advisor’s services

The larger the array of services an advisor has to offer the better skilled he/she would be. The problem lies in the authenticity of those services. Saying and knowing are two very different things. You will have to do your homework to know who actually is a skilled advisor in the lot.

  1. Life stage

Needless to mention, financial advice will prove beneficial at any and every life stage. But what needs to be understood is that no single plan will suit all your stages. Make sure your advisor acknowledges this fact and serves you a plan accordingly.