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24/7 Wall St. Key Insights:
- A financial advisor doesn't just manage investments, though that is their main function.
- Working as a logical counter-weight to emotional decision-making, financial advisors can be a huge help during market volatility.
Selling a company is often a huge life transition, especially when a $4M windfall is involved. One Reddit user is grappling with whether to hire a financial advisor and struggling to justify the 1% assets under management fee all the way to retirement.
The Reddit user has acknowledged the common advice to invest passively or work with a fee-only advisor. However, they're also aware that the financial service industry is there for a massive reason: many people find value in it.
So, they're wondering what benefits they might be missing.
We'll take a look at the potential benefits of working with a financial advisor that may be easy to overlook, especially if you've never worked with one before.
Why We're Covering This
Deciding whether to take a DIY approach to your finances or hire a financial advisor is a huge question for many. Hopefully, this article will help you decide if professional management is worth the cost.
1. Holistic Financial Planning
Advisors do a lot more than give out investment advice. Advisors also help with things like charitable giving, complex life transitions, tax strategies, and estate planning. Managing $4M (which will hopefully grow in the future) requires a well-rounded approach beyond just investment returns.
2. Behavioral Coaching
One of the most valuable benefits of a financial advisor is helping their clients avoid making poor decisions during volatile markets. In times of economic downturns, a trusted advisor can be a huge benefit to have in your back pocket.
3. Tax Optimization Strategies
No one wants to pay more taxes than they have to. A skilled advisor can help you identify tax-saving opportunities, such as harvesting capital gains, Roth conversions , or tax-efficient withdrawal strategies. This is a huge benefit that's easy to overlook.
4. Time and Stress Reduction
Another huge benefit of a financial advisor is that you don't have to deal with as much financial planning. Managing a large portfolio can take up a lot of time and energy. Even if you can do it yourself, do you want to?
5. Wealth Transfer and Legacy Planning
With a $4M portfolio that will probably grow, planning for what will happen after you die will be necessary. An advisor can help structure your state in a way that minimizes taxes and makes everything go much smoother.
6. Customized Strategies
Several non-traditional investments may require some extra know-how, like real estate. An advisor can help you tailor your approach to these more non-traditional investments, which tend to make things more complex.
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