A financial advisor can help you maximize income and grow wealth. These financial professionals assist with investments, debt reduction, retirement planning, and all things to do with managing money.
This is a quick explanation of what a financial advisor does to help you manage money both now and in the future. You will learn tips for choosing a financial advisor who represents your best interests.
What is a Financial Advisor?
Consult with a financial advisor for help making the best decisions for spending and saving your money. You may work with an advisor short-term for help with one or two financial goals, or over decades with ongoing assistance. Services run from meeting once or twice to develop a simple financial plan, or meeting in person and on the phone for ongoing financial strategizing.
Choosing a Financial Advisor
You need to choose a financial advisor carefully because many professionals can call themselves a financial advisor. I most frequently find insurance agents, stockbrokers or wealth managers calling themselves financial advisors. These people can give you financial advice but are not typically as broadly-educated as a true financial advisor. They also may be swayed by commissions and unable to act as a fiduciary on your behalf.
Be on the lookout for advisors who passed the Certified Financial Planner exam, or is a chartered financial consultant or analyst.
What is a Fiduciary?
Financial advisors act as a fiduciary when they make recommendations based purely on the client’s best interest. A true fiduciary receives no commissions or other compensation from the financial products he or she recommends. These financial advisors earn their income solely from what their clients pay them.
At one time, it was difficult to determine whether an advisor was truly a fiduciary. However, those who sell financial advice and products must inform clients of commissions and other payments received outside of the fees charged.
The Securities Exchange Commission gives these professionals until June 30, 2020, to adopt the Regulations Best Interest rule. This regulation requires broker-dealers and investment advisors to their relationship with the products they sell, in easy-to-understand terms.
Services Financial Advisors Offer
Some financial advisors offer services for help with managing any money matters. You may also receive a variety of financial advice from several specialists who work together as a team at one company. Some financial advisors specialize in specific types of planning, like retirement, college, investing, reducing debt and more.
You can get help with learning how to eliminate debt in three years, set up a budget, planning to care for loved ones after your death or determining your risk tolerance and setting up a diversified investment portfolio. A financial advisor can help prepare your quarterly or annual income or self-employment taxes and choose insurance.
What Does a Financial Planner Cost?
Financial planners may charge a fee for services, or charge a percentage of your investment portfolio, or a combination of the two. Those who charge an hourly or flat fee probably are probably not receiving any payments from the investments or other products and services they recommend.
The cost of financial planning services varies a great deal depending on where you live. Financial advisors can charge from $150 to $500 or more an hour, depending on the complexity of your finances. Financial advisors who also act as investment advisors typically earn from .75% to 2.5% of the value of your portfolio. These advisors may include financial planning in that percentage, or as an additional cost.
Learn more about commission vs fee-based financial planners.
Financial planners who meet exclusively online and over the phone are becoming more popular. These advisors, such as Financially Wise, may offer services at a lower cost. They can work with clients all over the country.
Robo-advisors are digital financial planners you access online. You’ll save money with a robo-advisor, but they do not monitor your financial situation the way a human can. These apps can help balance your portfolio, set up your net worth and a budget.
Which Financial Advisor is Best?
If you like managing your money yourself but want the guidance of a financial advisor, look for a robo-advisor combined with assistance from a professional. You should also talk to advisors who meet online or over the phone to see if they use online or mobile apps to assist with financial planning.
Look for a local financial advisor if you:
- have a high net worth
- maintain a sizable investment portfolio
- need extensive retirement planning
- are looking for estate management services
These professionals should take calls any time you have a question and meet with you at least once or twice a year to go over your financial plan.
Learn more about what financial advisors do
Check out the Financial Advisor information on RetirementLiving.com to get detailed information about financial advisors. The site also offers a list of the best financial advisors in your area to help you get started with choosing a professional.