Quiz: Do You Need a Financial Advisor?

Do you need an advisor, or can you manage your own money?

Updated April 04, 2017

Quiz: Do You Need a Financial Advisor?

You got: You've got this (for now).

I got You've got this (for now).. Quiz: Do You Need a Financial Advisor?
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Has anyone ever told you you’re a great manager — maybe even a micromanager? While financial advisors can play many roles, their chief role is to help you create a plan for achieving both your short-term and long-term goals. But seeing that you’re a goal-oriented person as is (and that you enjoy making those goals happen) you’ve got more than half the battle covered. Advisors serve as educators, too, but if you don’t know something, you’re going to figure it out. 

If your circumstances change, however, and your financial life becomes more complex, you might change your mind. If there comes a time when you think you need one — or you’d simply like a few hours of one’s time — head to the Garrett Planning Network or the National Association of Personal Financial Advisors (NAPFA). Both are groups of fee-only independent financial advisors that charge a set fee for management instead of a commission or a percentage of assets under management.

Quiz: Do You Need a Financial Advisor?

You got: Consider a robo-advisor.

I got Consider a robo-advisor.. Quiz: Do You Need a Financial Advisor?
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You'd like some guidance for your financial life, and you’re not interested in actively managing it yourself. You’re also comfortable with technology and the idea of technology making your financial decisions for you. Consider a robo-advisor. Like its name suggests, robo-advisors are online, automated wealth-managers (or brokers) that use algorithms to manage your portfolio. 

Robo-advisors are cheaper than human financial advisors. When choosing a robo-advisor, you want to confirm what it offers: Can it manage all of your retirement accounts and other taxable accounts — or does it specialize in certain ones? Does it automatically rebalance? What are its tax-planning strategies? And, of course, what’s the required minimum investment to open an account, and what are the ongoing fees associated with it? 

Quiz: Do You Need a Financial Advisor?

You got: You Should Consider a hybrid.

I got You Should Consider a hybrid.. Quiz: Do You Need a Financial Advisor?
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You’d like some guidance for your financial life, and you’re not interested in actively managing it yourself. You’re comfortable with technology and the idea of technology making some of your financial decisions for you, but not all of them. Consider a robo-advisor with access to live advice. Robo-advisors are online, automated wealth-managers (or brokers) that use algorithms to manage your portfolio. More are becoming hybrids, offering the low-cost technology with the security of a human being. 

When choosing a robo-advisor, you want to confirm what it offers: Can it manage all of your retirement accounts and other taxable accounts — or does it specialize in certain ones? Does it automatically rebalance? What are its tax-planning strategies? And, of course, what’s the required minimum investment to open an account, and what are the ongoing fees associated with it? 

Quiz: Do You Need a Financial Advisor?

You got: You need a human financial advisor.

I got You need a human financial advisor.. Quiz: Do You Need a Financial Advisor?
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You’d like guidance for your financial life and someone to manage it — the keyword being someone — an actual human being. You’re not necessarily comfortable with the idea of a computer controlling your every financial move — and you like the idea of someone knowing you and how you feel about your finances. 

Two places to look are the Garrett Planning Network and The National Association of Personal Financial Advisors (NAPFA.org).  During your first meeting, ask for the advisor’s ADV Form (required by the Securities and Exchange Commission), which tells you how the advisor is compensated and lists any conflicts of interest. In other words, do they earn a commission when they recommend certain investments? Also, ask for references from your friends and coworkers, and call them. The ones your coworkers’ use could be particularly helpful, since they’ll likely have similar financial profiles, including the same requirement accounts and other benefits.