Skip to main content

The Pros and Cons of Hiring a Financial Advisor

By U.S. News & World Report

Making long-term decisions about money can be difficult and even a little scary. Many people turn to financial advisors for help with their financial decisions. Many advisors offer good advice, but deciding whether or not they’re worth the price can be difficult. Before you hire a financial advisor, whether for advice on paying off debt or investing your extra income, be aware of the pros and cons of such a choice.

[Read: How to Pay Less Taxes on Retirement Account Withdrawals.]

Pros of hiring a financial advisor. There are many potential benefits to hiring an investment advisor. They often have a broader, deeper knowledge of money management than you do. This is especially true when it comes to complicated money matters like investments and taxes.

If you need help with investing and other financial planning, a certified financial planner may be the way to go. These individuals can help you figure out your savings strategies, retirement options and overall retirement plan. A professional opinion can be especially helpful toward the beginning of the retirement planning process, when you’re trying to set goals.

Another benefit of hiring a financial advisor is that he or she can save you time. Some of these individuals will manage your portfolio for you, which will take this particular task off your plate. While you will need to periodically meet with your advisor to talk about your goals and where your investments stand, you won’t be responsible for things like periodically rebalancing your accounts.

Finally, when you’re hiring a financial advisor, especially a fee-only advisor, you may find that you put only a little money into getting some great advice. You will need to shop around to find an advisor who charges reasonable fees, but many of them, especially online advisors, offer good services for a small fee.

[Read: How Your 401(k) Balance Stacks Up.]

Cons of hiring a financial advisor. One of the biggest drawbacks of hiring a financial advisor is that they don’t always have your best interest in mind. While some advisors are bound to make decisions that will benefit the client, it’s not unusual to see conflicts of interest pop up. You can avoid some problems by using a fee-only advisor, rather than someone whose income increases from selling you specific products and services that might not be appropriate for your situation. Find out if your potential financial advisor is willing to act as a fiduciary. Fiduciaries are required by law to recommend investments in the client’s best interest, not their own. Beginning in April 2017, those who provide advice to 401(k) and IRA participants will be considered a fiduciary, due to a new Department of Labor rule.

Another potential issue with financial advisors is that if you’re not investing much money, even a small fee can significantly cut into your returns. If you don’t have a huge portfolio and are just starting out, you may not be able to afford to hire a financial advisor. Learning as you go and allowing yourself to make some mistakes could be beneficial over the long term, but might hurt your short-term returns.

Finally, before you shell out money to an advisor, consider that there are many alternatives, especially in the online investing market. Tools like Motif Investing and Personal Capital can help you get more comfortable with investing without spending hundreds on financial advice. You still need to pay for these services, but the costs are often lower, and you play a bigger roll in managing your own investments.

[See: 10 Tax Breaks for Retirement Savers.]

Deciding if an advisor is right for you. Sometimes hiring a financial advisor does make sense, but this isn’t always the case. Take a look at all your options, including cheaper online investment options, before you decide whether or not to hire an advisor to direct you or even take control of your investments.

More from U.S. News

10 Ways to Get Ready for Retirement After Age 50

10 Ways to Make Your 401(k) Balance Grow Faster

10 Costs to Include in Your Retirement Budget

The Pros and Cons of Hiring a Financial Advisor originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote