As millennials advance in their careers, many question the need for a financial advisor in an era of easy information access and one-click investing. However, hiring an advisor could be a wise move. Here are seven reasons why.
Achieving financial independence, maximizing income, and retiring early are attainable goals for millennials with a solid financial plan and smart investment practices. While millennials may wonder how a financial advisor could add value in today’s world of abundant information and easy decision-making, the truth is, an advisor can be an essential part of your financial strategy.
So, why pay for something you might do yourself?
Millennials are perhaps more financially literate than any previous generation. Investment apps allow users to engage in stock picking or day trading from their phones, offering excitement and quick rewards. However, just as you wouldn’t rely on a YouTube video for performing surgery, planning your financial future, including retirement, is too critical and complex to handle without professional help.
Information Overload
With vast amounts of information available, it’s tempting to think you know everything. Yet, online searches, apps, and algorithms can’t predict the stock market with certainty. Popular stock tips are often already priced into the market. More importantly, these tools don’t account for your personal situation as an experienced advisor would.
A financial advisor provides thoughtful, informed guidance tailored to your specific needs, including managing student loans, inheritance planning, and investment strategies based on your risk tolerance. While self-research can answer immediate questions, an advisor can ask you the questions you haven’t thought of.
Value of Professional Advice
Many millennials are cautious about fees but willing to pay for advice that adds real value. Here’s how a financial advisor can help:
1. Keep Your Financial Plans on Track
With so much financial information available, making informed decisions can be challenging. A financial advisor helps you prioritize goals, balance them, and create realistic financial projections.
2. Enhance Diversification and Discipline
While diversified funds might seem dull compared to the excitement of tech stocks, a disciplined approach provides stable returns over time. An advisor helps build a diversified portfolio with long-term growth potential, preparing you to weather market downturns.
3. Reality-Check Decisions and Turn Downturns into Upsides
Advisors help you make logical decisions rather than emotional ones. For instance, during the 2020 market sell-off, many investors panicked and sold their equities at a loss. Advisors, on the other hand, provided guidance to take advantage of low prices, turning setbacks into gains.
4. Understand Your Individual Situation and Big Picture
A fiduciary advisor offers personalized advice based on your unique situation. They consider your family, career plans, and overall financial picture, including estate planning, life insurance, and tax strategies.
5. Access to Research and Alternative Investments
Advisors can offer access to investments like cheaper share classes and complex products that might be unavailable otherwise. They help you navigate and evaluate these options, ensuring they align with your goals.
6. Manage and Prioritize Wealth Infusions
Receiving a large sum of money can be overwhelming. Advisors help you decide how to invest, pay off debt, and plan for taxes and estate planning to secure your beneficiaries’ futures.
7. Maximize After-Tax Returns
Understanding the complexities of different accounts and investments is crucial. Advisors help achieve the best after-tax returns by strategically placing investments, rebalancing portfolios, and using tax-efficient strategies.
Final Thoughts
Millennials may have unique values and goals, but the value of an objective financial expert remains unchanged. DIY investing can complement a sound financial strategy but shouldn’t replace it. Choosing an independent financial advisor early on can help you seize opportunities and make effective investment changes to achieve your goals.
