Have you ever held your hands up and wished money management was easier? Navigating the world of finance can be a daunting task, working with financial advisors for young adults can help ease some of that burden.
Now that you’re earning a reliable income, you may be thinking deeply about your student loans, future property investments, retirement planning, or starting a family.
No matter how far off those plans feel, the financial decisions you make today can significantly impact your future. Fortunately, the guidance of a financial advisor for young adults can make this journey more manageable so you can look forward to your future.
Whether it’s crafting a financial plan, enhancing financial literacy, planning for retirement or a child’s education, making investments, or even estate planning, financial advisors for young adults like you can help you to develop and sustain a healthy relationship with money.
What is a Financial Advisor for Young Adults?
A financial advisor for young adults, or for any individual, is a financial professional with the credentials and experience to manage investments, take charge of tax planning, create financial plans, and offer advice in various financial areas, including but not limited to retirement planning and wealth management.
While no single qualification defines a financial advisor, they often acquire certifications to enhance their skills and demonstrate their specialization such as:
- Certified Financial Planner (CFP)
- Registered Investment Advisor (RIA)
- Chartered Financial Consultant (ChFC)
Financial advisors come from diverse educational backgrounds but undergo extensive training and accumulate years of experience in their fields, so they have the tools necessary to support the financial advice they provide.
They stay up-to-date with the latest trends and regulations to offer informed financial advice. They possess the knowledge and expertise required to assist young adults in navigating their unique financial challenges and opportunities.
Financial advisors can assist young adults in a multitude of ways. If you need help with any of the following a financial advisor can provide expert guidance:
- Creating a comprehensive financial plan
- Improving your financial literacy
- Initiating retirement savings
- Saving for your child’s education
- Venturing into the stock market
- Planning your estate
They tailor their advice to suit your specific financial goals and circumstances.
For example, if you belong to the Gen Y cohort, your priorities may involve socially responsible investing (SRI) or environmental, social, and governmental (ESG) investing. A personal financial advisor can help align your investments with your values and financial objectives so you’re not limited to cookie-cutter planning services.
By working closely with a financial advisor, you can gain the knowledge and confidence to make informed financial decisions that set you up for long-term financial success.
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How Much Does a Financial Advisor for Young Adults Cost?
Financial advisors typically charge fees based on their services and compensation structure. There isn’t a standardized fee structure that applies to all financial advisors.
The fees vary depending on:
- the type of firm or brokerage the advisor works for
- their credentials
- their certifications
- their areas of expertise
One fee commonly charged by financial advisors is the asset under management (AUM) fee. This fee is a percentage of the assets the advisor manages for you.
It’s important to understand that this fee is separate from any costs associated with the investments. The asset management fee compensates the advisor for their expertise and ongoing monitoring of your portfolio.
In addition to asset management fees, advisors may charge other fees for specific financial services. For example, they may charge a flat fee for creating a financial plan or providing a one-time consultation. Some advisors may also charge hourly rates for their time.
Why Young Adults Need a Financial Advisor
Unfortunately, financial advising isn’t a core part of the curriculum for many Americans. As such, it can be difficult to know where to start when you’re finally out on your own as an adult.
A financial advisor can give you the confidence to begin financial planning so you can work towards your version of the American dream––whatever that may be.
Early Career Challenges
Starting a career can be an exciting but challenging time for young adults. From navigating the job market to understanding employee benefits, there are many financial decisions to make. A financial advisor can help young professionals set realistic financial goals, create a budget, and develop a plan to manage their income effectively.
If you’re starting a new job, financial advisors can help you set short-term goals that support your long-term objectives.
Early in your career, you’ll navigate important decisions, such as choosing the right bank account and credit cards for your needs. A financial advisor can streamline the process of comparing different products and help you make an informed and confident decision.
Managing Student Loans
Many young adults graduate with substantial student loan debt. A financial advisor can create a strategy that manages student debt. They can also work with you while you explore options for refinancing or consolidation. They’ll help you develop a financial plan prioritizing affordable loan payments that don’t detract from your financial goals, such as growing your savings account.
Renting vs. Buying a Residence
Deciding whether to rent or buy a residence is a significant financial decision. A financial advisor can help you weigh the pros and cons of renting and buying by considering your current and future financial situation, long-term goals, and market conditions.
They can provide valuable insights on affordability, investment potential, and building equity so you can time your decision well for your current circumstances and aspirations.
Starting a Retirement Savings Program
Retirement may seem far away for young people, but being proactive can make a significant impact. A financial advisor motivates you by discussing the importance of retirement savings and helping you choose the right retirement accounts, such as a 401(k) or an IRA.
They can also provide personalized advice on contribution amounts and investment options to maximize growth potential and build wealth long-term.
Financial Planning for Parenthood
Starting a family brings additional financial responsibilities. A financial advisor provides planning services to help young adults prepare financially for parenthood by reviewing insurance coverage, creating a budget that accounts for childcare expenses, and planning for future education costs. They can also help young parents establish an emergency fund and explore college savings plans.
Investing Priorities for Young Adults
Simply put, you need to invest to build wealth, but where you invest matters. A financial advisor can guide young adults on investment strategies that align with their risk tolerance and financial goals. They can explain the basics of investing, recommend suitable investment vehicles, and provide ongoing portfolio management to optimize returns.
Socially Responsible Investing (SRI)
Young adults often have a strong desire to impact society positively. Socially responsible investing (SRI) allows individuals to align their investment decisions with their values. A financial advisor can educate young adults about SRI options, recommend socially responsible investment funds, and help them create an investment portfolio that reflects their ethical beliefs.
Environmental, Social, and Governance (ESG) Investing
ESG investing supports companies that care about environmental sustainability, social responsibility, and good governance practices.
A financial advisor can help young adults understand the benefits of ESG investing and identify ESG-focused investment opportunities. They can provide research on companies’ ESG performance and help young adults incorporate ESG principles into their investment strategy.
How to Choose a Financial Advisor for Young Adults
When it comes to managing your finances, seeking the help of a financial advisor can be a wise decision.
However, you need to consider a few key factors before choosing a financial professional.
Flat Fee vs. Commissions
When choosing a financial advisor, you’ll need to consider their fee structure. Some financial advisors charge a flat fee, while others operate on a commission basis for their recommended products.
Each option has pros and cons, so you’ll need to understand them before deciding.
Fee-Only Financial Advisors
Fee-only financial advisors charge a flat fee for their services, regardless of how much money they manage or the investments they recommend. Fee-only advisors typically uphold the fiduciary standard, which legally obligates them to put your needs ahead of their financial gain.
Flat fee structures provide cost transparency and clarity, so you’ll know what you’re paying for ahead of time. It also aligns the advisor’s interests with your own, as they are not motivated by commissions on specific products. However, their scope of work may be more limited than holistic financial planners.
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Commission Based Financial Advisors
On the other hand, a financial advisor who operates on a commission basis will earn a percentage of the investments they recommend or sell. While this may seem like a potential conflict of interest, it’s worth noting that not all commissions are inherently bad.
However, it’s important to be aware of potential bias and ensure that your advisor acts in your best interest by building a strong relationship and asking clarifying questions.
Choosing a commission-based or fee-only financial advisor will depend on your preferences and financial situation. Consider your budget, the complexity of your financial needs, and the level of transparency you desire before deciding.
Consider Robo-Advisors As an Alternative
Technological advancements have recently introduced a new alternative to traditional financial advisors: robo-advisors.
Robo-advisors are online platforms that use algorithms and automated processes to provide investment management services at a competitive price point.
Pros
One of the main advantages of robo-advisors is their affordability. Compared to personal financial advisors, robo-advisors often have lower fees, making them an attractive option for individuals with smaller investments.
Additionally, robo-advisors can offer convenience and accessibility, as they are available 24/7, and you can access them from anywhere with an internet connection.
Cons
However, it’s important to consider the limitations of robo-advisors. While they can provide efficient and cost-effective investment strategies, they may lack the personalized guidance and human touch you need if you’re new to investing.
If you have complex financial needs or value in-person interactions, a traditional financial advisor may better fit you.
Before choosing a robo-advisor, take the time to research and compare different platforms. Consider factors such as fees, investment options, customer support, and the company’s reputation. Reading reviews and seeking recommendations from trusted sources is also a good idea.
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Financial Advisors for Young Adults: Is One Best for You?
Financial advisors can benefit young adults as they navigate their unique financial challenges and opportunities.
Whether you’re focused on paying down student loans, starting a retirement savings plan, or investing in socially responsible funds, a financial advisor can provide expert guidance tailored to your specific needs.
Understanding how your advisor makes money and what fees you’ll incur can help you make wise decisions. Some advisors may receive commissions for specific investments, which can increase your expenses. You’ll benefit most from a financial advisor who is transparent about their fees and acts in your best interest.
If you’re looking to lower fees and your financial needs are simple enough, a robo-advisor can be an entry-level tool that helps you grow your comfort in money management.
Finding the right financial advisor can be a valuable investment in your financial future. We recommend financial advisors to young adults interested in creating a comprehensive financial plan and improving their financial literacy.
The right financial professional can easily guide you toward achieving your financial goals. Their expertise, guidance, and support can help you confidently navigate the complexities of personal finance.
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