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As a millennial there are probably very few other things that give you mixed emotions like the words Financial Advisors. Some of us think of them as the money police. You’re always told that you don’t know enough to look after your own money. So keep your hands in the air, slowly step away from the bank account and hand over all you’ve saved to them. Then there’s the suspicious group (where I fit in) that views them as agents for big financial firms keen to sell us their products to increase their commissions. Lastly, there are the self-made wealth coaches that tell us that we do not need Financial Advisors. And that no person has ever become rich through using a Financial Advisor.
Financial Advisors defined
All these arguments may have credit to a certain extent. But there are crucial benefits that Financial Advisors can provide to one’s financial stability once their function is rightly understood. According to Investopedia the role of Financial Advisors is to provide financial guidance and different services. Theses services include investment management, income tax preparation and estate planning. Meaning even by definition, these guys are not designed to make us rich.
The Argument for Financial Advisors
And so the question holds, if they won’t make me rich, why do I need them? Especially since I’m paying for it. In a heated discussion on popular finance publication, Get Rich Slowly, one commentator who is a Financial Advisor said “We don’t make people rich, that isn’t our job. We make people plan, so they will always have financial security. Regardless of what the numbers look like. In fact, most of my wealthiest clients need a plan far more than my least wealthy, or they won’t be wealthy for long.”
Attesting to this another Financial Advisor said that his role is to assist people with their overall financial situation. To look at the situation of an individual in relation to their family, assets, liabilities, insurance, healthcare, education for children/grandchildren. And then make recommendations in terms of how much risk is appropriate for that family to take.
The Trend With Millennials
Millennials are known as the DIY generation. So it shouldn’t come as a surprise that in a research study, 82% of the millennial respondents said they choose to be involved in day-to-day management of their own finances. However the same study found that almost half of these millennials said they would use the service of a Financial Advisor.
Although I was not a part of this study, I totally agree with its findings. Living in the information age, many of us have access to knowledge about markets and our finances more than previous generations ever dreamed. We’ve lived through the 2008 financial crisis and witnessed how ugly things can get when the market turns against you. So we’re opting to educate ourselves more about our money. We are taking control of the money exchanged for our most valuable asset: our time. However, we also admit that we do not know it all. And that there are areas of knowledge that Financial Advisors are more equipped to help us with than 100 hours spent on Google ever will. This approach to using Financial Advisors is defined as the Hybrid Model and said to be growing steadily among us.
It’s quite obvious that the answer to the question isn’t straight and narrow. The choice to use a Financial Advisor highly depends on one’s knowledge and time-or lack thereof. Compare this to the stay at home mom without assistance from a nanny since she has enough time, and resources to take care of her own kids. To the extreme of the very busy working mom, who hires professional help to raise her kids since her time and resources are limited. Both should care and take responsibility for the well-being of their children. Just as anyone should care and take responsibility for the state of their finances. So even though it is not the Financial Advisor’s duty to make you rich, if chosen correctly they sure can add great value to you during that process.