Real estate agents are constantly on the go, networking, showing properties, and closing deals. However, like any other professional, real estate agents need to think about their financial futures. Furthermore, real estate agents are small business owners, which compounds the need to plan for their financial future as they do not have a built-in company retirement plan. If agents are going to build wealth and save for the future, they must take action. This is where a financial advisor comes in. In this blog post, we will discuss the top 5 reasons why real estate agents need a financial advisor and should not “For Sale By Owner” (FSBO) their personal finances.
#1 Financial Advisors Help Agents Get Organized
Real estate agents need direction and guidance as to what actions they need to take to get them to where they want to be financially. A financial advisor can help agents set financial goals and create a plan to achieve those goals. The first step in building a financial plan is figuring out where you stand today. A good financial advisor will build a net worth statement and analyze an agent’s tax return right off the bat. Then, they would format this information in a manner that the agent can see where they stand. Typically, the advisor will have financial planning technology that allows the agent to view this data on an app, allowing them to know where they stand at any given time. By working with a financial advisor, real estate agents can get organized, stay on track, and feel confident that they are making progress toward their financial goals.
#2 Financial Advisors Provide Consistency
As with any skill, financial success takes repetition to thrive. A good financial advisor will provide a consistent process that helps real estate agents stay the course. By working with a financial advisor, agents can create a financial plan tailored to their specific needs and goals. However, a plan that doesn’t get implemented is only a dream. Being financially successful as a veteran agent takes a completely different set of financial decisions than what got you through the slim years when you were just getting started. Just earning a high GCI isn’t enough to build wealth, it’s how you deploy your GCI that determines your financial success. A good financial advisor for real estate agents will be checking in on a quarterly basis to get updates and make adjustments to the plan. The biggest reason for this higher communication requirement is an agent’s variable income. This dynamic requires more attention than the average person who has a consistent W2 income. Regardless, a regular check-in with the financial advisor will ensure the agent is regularly aware and adjusting their finances to their optimal position. This quarterly check-in plan will provide them with a roadmap to financial success and the consistency to stay on track.
#3 Financial Advisors Know the Details
Being a successful real estate agent is more than a full-time job. You honestly don’t have the time to be the best real estate agent and the best financial planner simultaneously. Delegating financial tasks is a must. A financial advisor can manage your finances, so you can concentrate on your business. While there is a laundry list of items your advisor can help you with, the most vital ones for real estate agents are:
- Commission income management
- Tax planning
- Retirement plan selection
- Investment management
- Insurance analysis
- Rental real estate modeling
- Estate planning review.
A good financial advisor for real estate agents can do more than simply investing your money.
#4 Financial Advisors Help You Gain Clarity
Some of the most valuable conversations real estate agents will have with their financial advisors are around designing their future. What do you really want? To work until age 80? Or do you want to exit the real estate game by 50? There is no correct answer, but achieving one goal requires very different actions than achieving the other. A financial advisor for real estate agents will have advanced software that allows the agent to ask, “What if?” What if we spend $20,000 per year on vacations? What if we buy a family lake house? What if we max out the Solo 401k plan each year? What if we pay for 100% of our kids’ college costs? You get the idea. The financial advisor’s job is not to tell the real estate agent what to do, but to show them the financial impact of their various options. This allows the agent to make a confident and informed decision about the best path forward for them and their family.
#5 Financial Advisors help Agents Manage Cash Flow
Having a variable income and investing for the future can be challenging. Additionally, the optimal solution requires many different tools. The right financial advisor for real estate agents can help you design a net worth statement that provides the right balance of liquidity in the short term and growth in the long run. While there is no “one-size-fits-all” solution, many real estate agents would benefit greatly from having the following tools represented in their net worth statement:
- Checking Account – boring I know, but we all need one
- HYSA – High Yield Savings Account – if you are an agent and haven’t heard of a HYSA, you need to!
- Brokerage Account – provides for long-term growth while still allowing for liquidity
- Retirement Account – the account type will depend on what stage of their career the agent is in
- Investment Real Estate – while this isn’t a requirement, many successful agents can leverage their skill set and make real estate a significant asset in their net worth.
As you can see, real estate agents have unique financial needs that the average person doesn’t have to deal with. They need someone who can help them organize their finances, provide consistency, manage the details, help them gain clarity, and manage their cash flow. A financial advisor can help real estate agents achieve financial success so they can focus on what they do best – selling real estate. If you’re a real estate agent and want to start building for your financial future, we would love to connect. Grab a time on my calendar for a 30-minute phone call.
If you want a deeper dive into these 5 financial tools, you can download our guide titled, “How Top Producing Real Estate Professionals Can Take Control of Their Variable Income” and get the full run down.