Planning for the future will help ensure that you have enough money to meet your various goals and retire comfortably. But Northwestern Mutual's 2019 Planning & Progress Study reveals a disturbing statistic: A good 62% of U.S. adults say their financial planning needs improvement, while 30% haven't spoken to anyone about financial planning.
Furthermore, 20% of Americans say their financial plan is not designed to withstand market fluctuations. Seeing as how recessions are fairly common, that's problematic.
Also, 48% of Americans say they don't have clarity on how much money they can afford to be spending now and how much they should be socking away for retirement. That's troubling, because delaying retirement savings for even a few years could result in a serious shortfall down the line.
If you're in the dark about your financial planning needs and don't feel equipped to tackle them solo, enlisting the help of a financial advisor is a smart idea. But finding the right advisor is easier said than done, so here are a few key things to look out for.
1. Transparency about fees
Financial advisors don't work for free. They need to make money just like the rest of us, and this generally happens in one of two ways -- via commissions on investments they sell you or by charging you a fee as a percentage of your assets under management. The latter is generally a preferable arrangement, though the former is acceptable in some cases, too. The key, either way, is to clearly understand how your advisor gets paid, and any professional who can't explain that clearly isn't worth your business.
2. Honesty about risk
There's no such thing as a risk-free investment, and any advisor who tells you that isn't being truthful. A good financial advisor will explain the risks associated with different investments to help you make the best choices for your money.
3. Willingness to educate
Many people who hire financial advisors do so because they're clueless about investing and money management. But just because your advisor is the expert doesn't mean he or she shouldn't aim to share that knowledge with you. It pays to find an advisor who's willing to explain his or her thinking and strategy so that you're not only more comfortable with your investment choices, but are better-equipped to weigh in on decisions that impact your future.
4. Commitment to putting your needs first
It pays to find a financial advisor who holds to the fiduciary standard. This means that your advisor is required to put your best interests first at all times when recommending investments. Some advisors stick to the suitability standard, which only obligates them to recommend investments that are a suitable fit for you.
A good starting point when looking for a financial advisor is to solicit recommendations from family members, colleagues, or friends. Unfortunately, not every advisor out there is trustworthy, so by getting recommendations, you're more likely to find someone you can feel secure working with.
Remember, you don't need a financial advisor to retire securely. There are plenty of people who devise their own savings plans, assemble their own portfolios, and wind up just fine. But if you've been neglecting your retirement savings thus far or you have no idea how much to save or how to invest your nest egg, then getting that help could be a crucial move that gets you on the right track.