Time was, stockbrokers dealt primarily with the wealthy. That was before low-commission trades, triggered by deregulation in 1975, democratized the industry. Then, 401(k) retirement plans practically forced Americans to gain at least a bit of investing knowledge to steer their investments away from the rocks. So many investors still struggle to make sense of the process, yet neglect to hire a financial advisor, thinking their portfolio values aren't worthy of professional guidance.
"Some folks seem to think they need a seven-figure portfolio before consulting a financial advisor, but investment is only one facet of your broader financial picture," says Larry McClanahan, a financial planner in the Portland, Ore., area. "You don't have to be 'rich' to benefit from help mapping-out your financial priorities. In fact, Middle America may need help in some of these areas even more so than the wealthy."
Gary Alt, a financial advisor in Pleasanton, Calif., likes the mapping analogy as well: "Investing without a financial plan is like driving across the U.S.A. without a map. The financial plan starts by outlining where you want to go — expenses that are important to you, such as educating children, taking care of loved ones, house upgrades, etc. The financial road map then drives the investment plan by answering the question 'How do I need to invest in order to meet all of my needs?'"
Investing for retirement is a common goal, but many Americans are struggling with debt — and until that burden is removed, saving for retirement is often not an option. Focusing her practice on women and Gen X/Y young adults, Anika Hedstrom in Medford, Ore., is familiar with the damage that can be done by debilitating debt. "Often, in our society, we have a tendency to look at the rich as an untouchable class filled with good fortune, family connections, and an Ivy League degree," Hedstrom says. "But by picking up the book 'The Millionaire Next Door,' one can begin to realize that the average millionaire did not stumble upon a large inheritance, or make one stock trade to amass their portfolio. Rather, it is consistently living below one's means, pursuing business opportunities, and planning/strategizing for the future."
If debt is draining your assets, a specialized advisor known as a Certified FICO Professional may be able to assist. These advisors are particularly knowledgeable about credit reports and how to improve low credit scores. Services can include short sales, debt consolidation or settlement, loan modifications and general credit restoration.
How to Choose an Advisor
Choosing a financial advisor can be a chore. Thomas Batterman, a fee-only advisor based in Wausau, Wis., believes consumers are best served by searching for a very particular type of financial consultant.
"By hiring a fairly uncommon type of advisor — a fee-only fiduciary advisor — an individual investor can relieve themselves of the stress and frustration of making these types of decisions on their own and instead delegate them to a knowledgeable professional who is legally obligated to only make decisions that serve the client's best interest," Batterman says. The National Association of Personal Financial Advisors (NAPFA) is the country's leading professional association of Fee-Only financial advisors.
This article originally appeared on MarketWatch.com and is reprinted by permission from Marketwatch.com, ©2014 Dow Jones & Co. Inc. All rights reserved.