Depending on the net worth advisor you choose, you generally should consider hiring an advisor when you have between $50,000 - $1,000,000, but most prefer to start working with clients when they have between $100,000 - $500,000 in liquid assets. That is the level at which the benefits of hiring a financial advisor are likely to outweigh the costs. Most financial advisors prefer to work with clients in that range, since they want to provide value to their customers as well.
Now that we’ve given the general answer to how much money should you have for a financial advisor, let’s go into more of the specifics like:
- When is someone considered wealthy?
- How much money should you have for a wealth manager?
- What money is included in these figures?
- Do I need a financial advisor?
1. How Much Money Do You Need for Private Wealth?
One question that comes up frequently when people are thinking about financial planning is exactly what it means to be wealthy. This might be asked out of simple curiosity, wondering if you are wealthy, or what bank account balance it would take for you to become wealthy.
The answer is that wealth is defined differently by everyone, and it can be hard to set a specific number. However, the annual modern wealth survey by Charles Schwab found that in 2021 for the Americans polled:
- $1.9 million was needed to be wealthy
- $1.1 million was needed for financial happiness
- $624 thousand was needed for financial comfort
This is not to say that you have to already have any of those amounts of money in the bank before you seek the help of a financial advisor or wealth manager. Using the skills of these professionals is more likely to help you achieve your financial goals and you do not already have to be wealthy to hire a financial advisor.
2. How Much Money Do I Need to Hire a Wealth Manager?
Firstly, let’s talk about what a wealth manager does, and how it’s different from a financial advisor, then dive into how much money you should have before hiring either. A financial advisor is an investment professional that advises clients on a range of financial areas, including tax planning, budgeting, investment management, retirement savings and more. A wealth manager is a specific type of financial advisor who generally works with high or ultra high net worth individuals. Investopedia defines a high net worth individual as someone who has $1 million or more in liquid assets. So in general, you would need $1 million in liquid assets to hire a wealth manager.
If you have been using a financial advisor (or considering it) but are now moving into the high net worth individual category as your assets have grown to above $1 million, it may be time to consider a wealth manager instead. The financial needs and opportunities of high and ultra high net worth individuals is going to be different then those in different categories. Using the right professional for your situation will allow them to serve you better. At Delta Wealth Advisors, we specialize in helping hardworking business owners and executives achieve their financial goals. Specializing in this way lets us provide the most benefits for our clients using our targeted experience most effectively.
3. What Money Is Considered Liquid Assets?
We’ve used the term liquid assets several times as we’ve been talking about how much money someone would need to hire a financial advisor. But what does that mean? Does it include things like your house, car, retirement funds, etc?
In general, liquid assets are considered to be cash, or things that can be quickly and easily converted into cash without losing value. Stocks, bonds, bank accounts, and actual cash money are all common forms of liquid assets, and they would be included in the calculation of how much money you should have to hire a financial advisor or wealth manager. The estimated value of your real estate holdings (including your home), car, works of art, or other physical things that would need to be sold in order to generate cash generally are not considered liquid assets for these types of calculations.
Most financial advisors, however, would be happy to discuss with you the different assets you hold. If you have a significant portion of your investments in the form of real estate or a fine art collection, many wealth managers would still be happy and able to work with you. Don’t let the exact dollar amounts and whether they are liquid or illiquid stop you from reaching out to a wealth manager or financial planner. Most will be happy to answer your questions and work through these figures with you, and these rules are not hard and fast.
4. Does the Average Person Need a Financial Advisor?
At the end of the day, the question of if you, or anyone else, needs a financial advisor involves a few different pieces of information. The first is if you have enough money to make their advice worth it-that is to say, will they save or make you more money then you pay them. That’s what we’ve been talking about so far, and if you have over $100,000 in liquid assets, the answer is probably yes.
The second thing to consider is if you are in need of financial advice and management. For some people, managing their money and keeping close track of the stock market, real estate investment opportunities, and the latest tax code is something they enjoy and are good at. If this is true for you, you may not need a financial advisor because you may have the time and skills needed to excel at this on your own. But for many others, staying current on all the aspects a financial planner needs to know is something that they don’t have the time or desire to learn. If this sounds more like you, you may need a financial professional to get the most out of your assets.
Delta Wealth Advisors: Comprehensive Financial Planning
We at Delta Wealth Advisors don’t want to create a financial plan once and let it sit on a shelf. We work with you to create a flexible, actionable plan that empowers you to achieve your financial dreams. We focus on collaboration and frequent check-ins to make sure you stay on track with your goals. And our record of working with business owners and executives means we are able to offer new insights into your specific challenges based on our past familiarity with these fields. This means you can be more confident in your insights and financial decisions, knowing they are based on years of experience.
Check out our website’s Resources Page to see what all we have to offer, or schedule a call today to get started!
