Can I Afford a Financial Advisor?

You've already looked at the cost, but affordability is a different issue. Some of the priciest financial planners in the world charge thousands of dollars for the same services that their clients could get for 90 percent less.

There is financial assistance at virtually every price point, from ultra-discount to through-the-nose chic. On the low end, it might be free advice offered by a public agency such as the Internal Revenue Service or a consultation with your own mutual fund company or using their discounted advisory services; the upper end of the scale includes top planners, who charge hundreds of dollars just for an initial interview -- regardless of whether you hire them to work for you -- and money managers who take a big slice of the assets they run for you each year.

A lot of people who could not actually afford to work with upper-crust private money managers snuck and chiseled their way into becoming clients of convicted fraud Bernie Madoff.

They were stretching their finances for something they could not afford -- and lowering their defenses at the same time, because they could never get a personal consultation or meeting with Madoff -- all because they assumed that a rich, wealthy advisor with a long record just had to be terrific and safe and worth the risk of putting all of their eggs in one basket. They might have been right, had they not selected a crook.

Smart Investor Tip

The Madoff case is proof that it is not enough to simply look at what you are being charged; you must see how it fits into your budget.

The Madoff case is proof that it is not enough to simply look at what you are being charged, you must see how it fits into your budget. If you want ongoing financial planning services but cannot afford a $300-an-hour planner, then you will have two shopping choices: Change your expectations about how often you actually work with this advisor or set your sights on a lower-priced advisor who can meet your quality expectations and still deliver the service you need.

The Right Time to Hire an Advisor

If you knew trouble was coming, you'd get out of the way or fix the problems long before they get out of hand. With your finances, it is best to assume that there is trouble ahead and to go for assistance that will help you avoid it.

If you wait until you have trouble before hiring an advisor, the process becomes much harder to do properly. You'll go with a gut feeling or forego background checks or simply lower your standards to get out of the pinch.

But there's a big difference between "waiting too long" and having real trouble. If the IRS is beating down your door demanding money, you need help right now. If you just inherited $1 million and want to put it to work securing your future, you can set it aside in an interest-bearing account and take your time finding the right advisor.

No one ever got to retirement age and said, "Shoot, I can't quit now because I missed a day [or week or month] in the market." Plenty of people have rushed into bad financial advisory relationships and arrived at retirement age years later to wonder where their money had gone.

It's best to hire advisors when you don't need them. If you can't do that, at least understand that most financial concerns are not so pressing that you should settle for an advisor without putting him or her through a full and thorough review.

By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2016. Content published with author's permission.

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