Part of course:
Seeking Professional Advice
- Professionals to Consider
- An Accountant
- Financial Advisor
- Investment Manager or Money Manager
- An Attorney
- The Search Process
When you have been disciplined about your finances and have started saving a healthy amount of money, there will be a time when you should consider hiring professionals to help you as your wealth grows.
There will be benefits to having professional expertise available to protect your wealth, grow it further, and keep as much of it for you and your family as possible. Let’s talk about the types of professionals to consider hiring when to hire them, and how.
Accountants have the expertise you need to save money on taxes and keep you prepared in case of an audit. With the recent changes that go into effect for 2018, you will feel more confident managing the tax changes with the help of an accountant.
Here are some items that may make you consider using an accountant:
Accountants have varying levels of experience but looking for one that is a CPA, Certified Public Accountant, and has at least 5 years of private sector (taxes for individuals) experience is ideal. Accountants will specialize, therefore you should look for one that will meet your needs, such as business planning or international accounting.
Accountants can take quite a load off your shoulders, but you must be sure you are hiring the best. Mistakes can be costly, and your return could become flagged for an audit. Below we will go over questions you should ask when hiring a professional. You should also be prepared to spend the money needed to hire a good professional. Tax professional services are a deductible expense, but they will set you back $250 or more for straightforward returns to over $1,000 for more complex individual and business returns.
When your investable assets, outside of your company retirement plan, have exceeded $100,000 and your consumer debt is next to zero, it is time to consider a financial advisor. This threshold might be lower for you if your income is growing quickly or you are successfully self-employed.
Many financial advisors can create formal financial plans to help plan for retirement, education savings, and offer strategies for risk management like purchasing insurance. All the goals you want to develop a strategy for will go into a single financial plan. The plan may also include a budget or net worth statement and is designed to give you a complete snapshot of your finances at a specified point in time. It is a good idea to get a financial plan completed if you are 5-10 years from retirement, newly married, or starting a family. You can expect a financial plan to cost as little as $250 to over $1,000 for a more complex situation. A professional can help guide you through big life decision and help you select the right investments for you and your family.
Understand that there is a difference between a broker and a financial advisor. A broker is employed by a brokerage firm and will collect a commission based on trades they place on your behalf or on other products and services sold through their firm. A financial advisor is more of a support professional for you who is there to ask questions throughout the year and who will make investment recommendations in addition to reviewing your portfolio and goals on a regular basis.
Financial advisors may have a variety of designations with the most well known being the CFP, Certified Financial Planner, designation. Others may include:
A financial advisor can charge you a percentage of the assets they manage on your behalf, a flat fee, or a combination of the two. The industry is frowning more on more on financial professionals that collect commissions on the investments they recommend but there may be a few who still do.
An Investment manager may go by many other names as well, such as money manager or wealth manager. An investment manager is an expert in capital markets and security selection; like stocks, bonds, ETFs, or mutual funds. This type of expert will specialize in a particular area of the market and offer investors a product or vehicle for which they may invest.
One of the most well-known types of investment managers are those that run mutual funds. You may have heard of Vanguard, Fidelity Funds, SPDR ETFs, or iShares ETFs? There is a team of individuals assigned to a particular fund offered by the investment management firm and, as an example, the fund may select from only U.S. large-cap stocks that are in the technology sector. The team’s job is to analyze the stocks available in that universe and follow their stated strategy to select the ones they believe are best for the long-term.
When looking for the right investment manager, you should focus on their research expertise. A CFA, Chartered Financial Analyst, is a prestigious designation for an investment manager and indicates they are very knowledgeable in statistics, economics, and a wide range of security types they may select to use for their product.
There are hundreds of investment managers out there to choose, both big and small, and offering a wide variety of investment styles. It is a standard requirement to meet a minimum investment amount set by the manager. For mutual funds, it may be as little as $0, and for some more specialized products, there may be a $1,000,000 minimum. You can expect an asset-based fee to be charged by an investment manager, which means they charge an annual percentage of the assets they manage for you. For example, if you invest $10,000 it would be common for a large-cap mutual fund to charge 1.25% of your investment amount per year.
It requires a lot of studying and expertise to be able to select the best investment managers for your portfolio, and many individuals rely on the help of a financial advisor to do so. However, Morningstar is a well-known database of investment managers, and they have created tools for you to be able to search for the right manager based on your defined criteria. Their website, morningstar.com, will show you how to use the tools they offer and will give you suggestions on using the right selection criteria.
Attorneys are helpful in many parts of your financial life. They help with wills, business formation, patents, and for tax law, personal injury, or criminal services (hopefully you’ll never need them for this!) .
Attorneys will typically charge an hourly rate. However, some services may be a flat fee; such as simple wills or standard business formation. Hourly fees range from $150 per hour to $500 per hour and beyond, and will depend on a few different factors:
It is common that an attorney may provide you a free initial consultation to assess your situation and allow you to become more familiar with their process. Usually, services are available as needed, and you will want to use their time wisely to avoid costly bills. Many find the legal process intimidating, but as with personal finance, the more education you have, the better off you will be.
When searching for professionals, it is recommended you interview two or three potential candidates before you agree to hire one. You wouldn’t likely hire the first person you interview at your place of business, so why would you do it for your personal life? Get referrals from respected friends who are doing well in life. It is likely they are doing well because smart people surround them.
Here are questions you should ask when interviewing:
Having a reliable expert on your side is a huge benefit to your future and your financial freedom. Don’t settle for poor customer service and mediocre results. These experts are part of your team and are there for you to rely on when you need them most. If they are not meeting your expectations, then find another expert.