How a Financial Advisor Has Helped My Family in a Terrible Time
“What’s the point of having a financial advisor if everything you need to know is on the Internet?” Truth be told, that was pretty much my sentiment since I started becoming interested in personal finance. On the one hand, I understood why rich people might be willing to pay someone to manage their money for them — but why should we normies turn over our hard-earned cash just to have someone tell us how else we should be utilizing our money? Well, I sadly discovered at least one good reason why someone might want to have a financial advisor: the unexpected loss of a loved one.
As I shared in a previous post about funeral costs, my father-in-law recently passed away. Of course, while the funeral expenses themselves were a major financial hurdle, they were only the beginning. Since her husband’s death, my mother-in-law has had to update several of their accounts, take custody of things, such as pensions and Social Security payments, and much more. On top of that, even once all of the paperwork and phone calls are taken care of, there’s plenty to consider as she looks ahead to what her new financial life looks like.
Luckily, as I’ve witnessed, this process has all been made a bit easier by her employing a financial advisor/planner. With that in mind, let’s take a quick look at what a financial advisor is and why this experience has turned me around on the idea.
How a Financial Advisor Can Help Manage More than Just Your Money
The term “financial advisor” can be a bit nebulous. In this case, I’m speaking specifically of a Certified Financial Planner (CFP). Basically, a CFP can help you manage your money and achieve your financial goals. Sure enough, that’s exactly why my in-laws hired the firm in the first place.
Another factor to consider when looking for a financial advisor/planner is whether or not they are a fiduciary. As a fiduciary, your advisor is legally ligated to only recommend products that are in your best financial interests. In contrast, some fund managers may adhere to a lower standard where their recommendations only need to be “suitable.” This is notable because some professionals may earn commissions on the products they sell, thus giving them the incentive to put a client with an “acceptable” option rather than one that may actually be the best. Yes, it sucks to think about people doing that, but it does happen. Thus, it’s best to aim for a fiduciary instead.
Do you ever wonder how financial advisors get paid? Well, the answer is “it depends.” In some cases, they may charge a fee that amounts to a percentage of the funds they manage for you. That might sound like a good deal, but could end up costing you a lot in the long run.
Meanwhile, other advisors are paid a flat fee instead. Obviously, this fee could vary — and may also depend on your assets under management while not being directly tied to them. Personally, this is the option I’d prefer.
A few years back, my in-laws hired a financial advisory firm and were matched with an individual CFP. As I learned, this advisor would meet with them quarterly to check in on their finances, update any goals, and answer any questions. For this service, they paid a flat fee. While I don’t know the exact amount, looking on the firm’s site, they state that the average annual cost is between $2,000 and $8,000.
Although this advisor was originally hired to help my in-laws plan for my father-in-law’s impending retirement, things took a turn earlier this year — which is when I really got to see how helpful having a CFP in your corner can be. When my father-in-law passed away, the advisor was able to walk my mother-in-law through all of the steps she’d need to take in terms of her immediate finances.
This included filing paperwork with both the government and private entities such as insurance companies and pension plans. Moreover, beyond this checklist, they were able to share some basics on how each of these income streams would work and help my mother-in-law better understand her financial position. Of course, they were also extremely patient in answering any and all questions.
In subsequent meetings, her CFP has not only followed up on what’s been filed and what’s been received but has also been able to discuss what financial goals my mother-in-law has now that things are starting to settle. As these goals arise, the advisor has been able to recommend a number of options and, again, answer questions about specific other ideas one of us might have.
What’s been really great is that, seeing as my wife and I aren’t in the same state as her mom, this CFP utilizes a video conference service, allowing my wife to join meetings and keep on top of what’s going on. This has been extremely helpful as her family members all continue to navigate this new terrain together.
Even as someone who probably knows at least a little bit more about personal finance than the average adult, I certainly don’t know everything. Despite this, I’ve never really thought that my shortcomings meant that I should be working with a financial advisor to help me figure it out. However, after seeing how helpful my mother-in-law’s CFP has been through these recent trials, I can honestly say that my perspective has changed greatly.
With that said, while I’m definitely more interested in having a financial planner now, am I ready to hire one? Not quite. Personally, I think it would be a different story if we were making more, were considering a major life transition, if we were older, or if (God forbid) one of us were facing health issues.
Overall, I’m quite thankful that my in-laws hired a CFP when they did and that they’ve been so helpful over these past few months. For that reason alone, I think anyone looking for some guidance on their money and planning their long-term financial goals should consider a fee-only CFP as well.