5 Reasons Why You Should Share Complete Information With Your Financial Advisor

article image

When you’re planning for a financially stable and comfortable life, hiring a financial advisor can be of great help. Not only can they assist you in streamlining your expenses, but they can also help you when it comes to saving in a systematic manner as well as invest and grow your wealth. If you’re thinking of hiring a financial advisor, be mindful of two important traits that you should look for in your financial advisor - transparency and honesty. In addition, you should be open and forthright with your advisor as it would enable him to design a plan that best meets your needs. If you hide or omit some information from them, it can hinder their ability to offer you the right financial advice. Hence, it is prudent to share complete and accurate information with your financial advisor not to mention in your best interests as well.

Let’s discuss 5 critical reasons why you should share complete information with your financial advisor:

  1. It enables them to understand your relationship with money

    Every person has a different way of dealing with money - some people save preferring to put every penny they earn in a bank while others choose to live paycheck to paycheck having no funds to fall back upon in an emergency. By sharing information about how you see money, your spending habits, if you save or not allows your financial advisor to understand you better. It affords them a deeper insight into your present financial needs and future requirements. For example, if a person finds it difficult to save, having them invest in an account with strict withdrawal rules would keep them away from using their funds until they reach maturity. This enables them to save in a steady manner helping secure their future counteracting their need to send in the present. A financial advisor being privy to this information allows him to build some financial discipline into their client’s life and routine.

  2. It allows them to offer you helpful advice

    A financial advisor can offer you useful advice if he has information related to your income, future goals, past and ongoing debts, etc. that is critical when it comes to financial planning. Being honest and upfront about your present financial standing along with where you intend to be in the coming future allows your financial advisor to find relevant investments for you that can help you reach your financial goals. Moreover, you should discuss your risk appetite with your advisor so that he is aware of your ability and preference to take risks. This will enable him to create and modify your financial portfolio as per your risk tolerance to ensure that you save and grow wealth the way you’re comfortable with doing so.

  3. It helps them suggest a pertinent financial plan depending upon your family composition and needs

    Your financial advisor would be better able to assist you if he’s aware of your present marital status i.e. if you are single, married, divorced, or widowed. Your financial needs differ based on your marital situation and if you have dependent children or children with special needs, you need to take into account any expenses that you may have to incur in the future for their education or medical needs. Your family composition along with their dependency can affect your financial plan to a great degree. This makes it essential for you to be upfront about their financial dependence on you with your advisor since any major or minor life events can have a considerable impact on your financial goals, budget, and ability to invest. In case you get a divorce, your financial advisor can help you minimize the loss of assets and also suggest better savings instruments to invest in for your children or step-children should you choose to get married again. Furthermore, they can assist you in the case of estate planning and in establishing a trust fund, power of attorney, legal guardians for minors, etc.

  4. It empowers them to ensure short-term and long-term liquidity for you

    As discussed earlier, your personal life has a bearing on your financial plans, but so does your professional life. Every time you receive a salary hike, a promotion, suffer a job loss, or switch careers can affect your goals, investment preferences, tax liability, the need for diversification, buying or selling of investments, etc. A financial advisor can help you choose the right investment options given your existing income and liabilities. In addition, they can ensure that you invest every salary hike optimally and save enough money to be able to counter inflation.

  5. It helps them lower your tax burden

    As your savings grow, you need to ensure that your money does not end up being eaten by taxes. After you’re done paying property tax, inheritance tax, capital gains tax, etc., a considerable dent is made in your overall financial standing. A financial advisor can help you lower your tax burden by advising you to invest and save in accounts that facilitate savings and enable you to reduce your tax liability. Moreover, keep your advisor in the loop if you’ve used funds for any financial emergencies such as medical treatment. This would enable your financial advisor to make sure that your savings remain intact and are replenished to ensure your long-term liquidity and security.

To summarize

A financial advisor has a significant impact on your journey to financial freedom. But one has to keep in mind that the professionals can only help you if you treat them with honesty and transparency. Ideally, you should treat your financial advisor with openness, share accurate information with them and get in touch with them regularly. If you’re looking to hire a financial advisor, do consider keeping open lines of communication with them because, in the end, the advisor is there to help you create a financial plan that will secure your future. To get in touch with a qualified financial advisor, use the free matching tool and get connected with 1-3 background-verified financial fiduciaries. You may also set up a free initial consultation with them before deciding to hire one.

You may also be interested in

Popular Articles

Get matched with the best financial advisors near you to guide you towards your financial goals

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.