I recently came into $4 million and want to hire a financial advisor – how do I get comfortable with the cost?

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.