Congratulations! You’ve graduated from college and are now starting your career. This is an exciting time in your life and you may have a lot of questions around your finances. So, to whom do you turn for financial advice? Reaching out to your parents and friends for advice may be your first choice. However, now may be the right time to start building a relationship with a professional advisor.
As you start your financial journey, choosing the right advisor may be one of the most important decisions you make. By choosing well, you can have someone to guide you as you make financial decisions both big and small over the course of your life. Though your needs may change over time, you won’t have to change your advisor if you choose well.
Start Saving Early
Initially, you may not have a lot of money to invest, but you likely will have a lot of questions related to your finances. You may have a job that pays more than you have ever made in the past, so it shouldn’t be a problem, right? You will soon find there is no shortage of things to spend your money on. You will face difficult choices on how best to allocate your income to your needs. After a few years out of school, you may start thinking about settling down and getting married or buying that first house. There are a lot of considerations around budgeting for expenses and saving for that first down payment. In addition, many students come out of school with loans that they need to start paying off. So, where to begin?
One of the first, important savings decisions you will need to make is about contributing to a retirement plan at work. When you are young, it is always difficult to think about your future retirement since it seems so far away. You may think that you can start saving in the future when you are making more money. The problem with that line of thinking: it never gets easier to save money. Typically, as your income grows so will your needs – paying for that new house, having children and paying for daycare when they are young, buying all of those toys you have dreamed of or, maybe at some point, getting that summer home.
Choosing Your Advisor
Discussing your finances can be very personal and not something you want to share with just anyone. Building a long-term relationship with an advisor you feel comfortable talking to can be beneficial, since he or she would have to understand you and your needs before providing guidance. You may want to consider asking your parents if the advisors they work with would be a good fit for your needs. If you don’t want to work with your parents’ advisors directly, they may have an associate on staff that is a good fit for you. Working with someone in the same office as your parents’ advisors has some advantages: they would understand your family dynamics and coordinate financial planning when it makes sense.
Choosing an advisor can be confusing. The terms planner, advisor and consultant (just to name a few) are used widely, but not everyone provides the same level of service.
Some advisors may say they do planning but are more interested in selling you products. It is important for you to understand the services that an advisor provides and what his or her background or training has been. You will also want to find out how your advisor will be compensated for his or her services. Some will get paid based on the products they sell you; this could result in a conflict of interest. Some advisors have their own business with a few support people, while others may have no support staff. It is important to understand the dynamics of your advisor’s team and what the back up plan is, should an emergency arise.
New Trends in Advising: Online and Robo Advisors
One of the new trends in the financial services industry is using an online advisor or robo advisor to get planning or investment advice. This can be a very low-cost option, but the services offered may be limited and lack a personal connection. Robo advisors don’t get to really understand you and your views on money. In some cases, they may only provide tools for investing and not have the capacity to work with you on some of the planning considerations mentioned earlier.
When it comes to investing, one of the most important factors for long-term success is to have a plan and stick with it. Making changes based on short-term fluctuations in the market or the economy could be a huge mistake. It is difficult to stay disciplined when the stock market is down. Having an advisor to talk to during those uncertain times can be hugely beneficial. In some ways, talking to an advisor in person is a big part of what you are paying for — especially considering how difficult it can be to take the emotion out of your investing decisions.
Choose Your Advisor Carefully
There are many factors to consider when selecting an advisor and it may make sense to find one earlier rather than later. Make sure to do your research so you can find an advisor who understands your financial needs and aspirations, someone you are comfortable with for the long haul, and someone who is a good fit for you.
This may be one of the most important financial decisions you make.