Financial Advisors--A Must Have for Uncertain Times?

Question of the week: I've always been a do-it-yourselfer, but with the uncertainty of the market these days, I'm starting to think that I might need a financial advisor. What's your take on advisors? --Mac G. Dear Mac, In my opinion, financial advisors too often get pigeonholed as primarily investment advisors. Advisors can help you in several areas of your financial life, including insurance, estate planning, and even taxes and bill paying. So, it depends on your situation. If you're young and have settled into a long-term, common sense plan that you're comfortable with, I think you're perfectly capable of managing your portfolio yourself. For people who are closer to retirement, however, or who have more complex issues (for example, lump sum distributions or inheritances), or want someone to "coach" them through financial decisions, hiring a financial advisor can be a very wise move that will pay off handsomely. Over the years, the members of the Armchair Millionaire community have gotten a great deal from their relationships with their financial guardian angels. Here's what they think about advisors: To keep on track. "A good financial advisor helps you stay the course and not succumb to the crisis du jour. Their fee will pay for itself many times over when everything is said and done." --WK To decipher the rules. "You must use an advisor. There are simply too many rules and regulations for most people to keep straight, especially in the areas of tax planning and of maximizing tax deferred savings plans." --Larry C. For one-stop shopping. "I had a CPA who did my taxes for many years and when he became a CFP it was an easy move to solicit his advice on retirement and financial planning." --Steve To supplement what you know. "A basic understanding of how your money is working for you, coupled with the expertise of someone who can plan out your financial goals and work to achieve them is a great combination, and a necessary one for most people." --Michael R. If you do decide to go the financial advisor route, use my checklist to find the best one. The Armchair Millionaire Checklist for Choosing a Great Advisor Use referrals with caution. Be careful to distinguish between recommendations from people who like their advisors personally and those who are qualified to judge an advisor's skill and knowledge. Make sure to get recommendations for at least three different advisors and interview all three so you can see the range of possibilities. Do your homework. Any potential advisor should be prepared to meet you in an initial interview and explain their approach to investing and planning. Ask them who their ideal client is based on their expertise and background. There should be a match between you and their ideal client. Stick with fee-based. Your advisor should be compensated primarily through a fee structure you agree on in advance, and not by brokerage commissions. Advisors who work on commissions may be more likely to recommend frequent transactions in your portfolio, which has never been proven to increase investment returns. Get a written investment policy statement. This statement should provide specific guidelines about your asset allocation, target return, risk tolerance, time horizon, tax constraints and anticipated withdrawals or contributions. You should understand this document completely before moving forward. THE BOTTOM LINE: Your portfolio is more than just your stocks and bonds; it's your whole financial future. If you don't have the time or inclination to closely manage it, a well-chosen advisor can be a terrific ally in achieving long-term financial freedom.