If you’re like most people, you might promise yourself, year after year, that you’ll really get your finances in order one day. Perhaps one day never comes because you’re not quite sure 1) what financial order really looks like and 2) who or what can help you attain this elusive “financial order.”
Perhaps you’ve thought of working with a professional that might help you make financial goals and achieve them. However, the thought of navigating the waters of financial assistance just plain scares you.
You also wonder if you even have enough money amassed to justify a financial advisor’s cost. Would you pay this professional outright or do you have enough wealth that would make you an attractive client for a good financial advisor?
That’s exactly why this matter keeps getting pushed to “some day.” The only problem with this approach is that while you are waiting to be “financial advisor” worthy, you could be losing the very time that can work in your favor, even working with small amounts of money.
Managing money and choosing the right resources to do so can be hard. It can be confusing, overwhelming and discouraging all at the same time. However, you can make progress, one small step at a time. One of those steps could be seeking out help.
If you think you’d do better with the help of a financial professional, consider working with a financial advisor as soon as you can — whether you’ve got a large income or an impressive nest egg or not.
Before delving into the “when” of getting with an adviser, we should take a look at the “who.” You should know who is considered a qualified financial advisor (and who is not.) This will give you the information you need to make an educated decision about choosing the best financial advisor for your needs.
What is a financial advisor?
A financial advisor is someone that can guide you toward financial outcomes in accordance with the stage of life you are in. Depending on their area of specialty or particular designation, a financial advisor could go through several hours of training and education about various financial subjects and products. Many times, they will also have passed an exam based on what they have learned in order to serve clients in a professional setting.
Because the term “financial advisor” is not regulated, not all people who refer to themselves as financial advisors will have completed a standard course of education and training along with an exam. There are some “advisors” that are product-specific and may only be trained or licensed to sell certain types of financial products from certain companies.
Also, you should know that a financial advisor is a broad term that can cover a number of specialists with varying areas of expertise. Your financial life is not one dimensional, so your advisory needs will, more than likely, end up being multidimensional.
You may need advice on paying off debt, investing, estate issues, taxes or even small business matters. So, it’s important to work with a financial advisor that understands your financial situation and can cover you on all fronts when you need help.
When should I get a financial advisor?
Are you breathing? Then you need a financial advisor!
All jokes, aside, a good time to begin working with a financial advisor would be when you become gainfully employed, perhaps immediately after high school or college. You will be faced with a number of financial decisions, all at once, during this time, so it’s best to seek help so you can sort through your options with an informed mindset.
Even if you are well past this time in your life, you can still benefit from the services of a financial advisor. Whether after college or after your wedding, you’ll likely have tons of burning questions you’ll need answered when it comes to making the best money moves.
Is it best to pay down debt aggressively? Finance a car? Get a mortgage on a home? Invest in an employer-sponsored retirement plan or stock purchase plan? What should I do with my money?
Many people mistakenly think that if they don’t have savings with many trailing zeros, there probably won’t be any advisors that will work with them. After all, doesn’t a financial advisor help you with money that you actually have? As a recent high school or college graduate, you’ll be pretty light in the area of massive savings. So what can you do?
As we’ll see below, the type of financial advisor you work with will depend on the arrangement you prefer — even if you don’t have loads of money right away.
Which financial advisor is best for me?
Choosing the best advisor for your needs comes down to understanding what role your advisor will play in your life. Though many advisors and well-educated and experienced when it comes to money matters, you must be sure not to totally abdicate your money management and planning responsibilities to another person entirely.
Your financial advisor should work alongside you to help you plan your financial life. So, when vetting your options, make sure you express this desire upfront. There should be a clear understanding of what you’ll bring to the table along with expectations for your advisor.
Types of financial advisors
As mentioned, there are many people in the financial services industry that will call themselves advisors, so it’s important to know exactly what financial issues they can provide advice for.
Some people focus on a set of financial products. These products could range from annuities to reverse mortgages to highly specialized insurance. Though these folks can be helpful, you’ll want to make sure that the commissions they receive for selling these products doesn’t influence the advice they give you — especially if it’s not in your best interest.
Then, you’ve got a set of professionals like lawyers, accountants and insurance brokers who can serve in an advisory role when it comes to certain money matters. Though they can certainly contribute to guiding your financial life, you cannot rely on their advice, alone, to plan the best financial outcome for your life. For this reason, you’ll want to add a financial advisor to your team.
Certified Financial Planner (CFP)
When it comes to certified financial advisors, most people are familiar with the Certified Financial Planner (CFP) designation. A CFP has been accredited by the CFP Board, which requires the four Es, to be met for certification: education, examination, experience and ethics. CFPs must also renew their certification every two years, which also includes 30 hours of continuing education. CFPs are qualified to provide advice regarding estates, insurance, taxation, investment and retirement needs.
Chartered Financial Analyst (CFA)
You could also work with a Chartered Financial Analyst (CFA.) These finance professionals must also meet minimum requirements for certification and education.
They are well versed in the area of financial analysis and most often work with high-net-worth individuals, businesses, and corporations for needs like asset management or portfolio analysis when it comes to dealing with large investments and sums of money. For most people, it is not necessary to work with a CFA.
Though this is not an official designation, it is an offering even some of the best financial firms making available to clients. Robo advisory is artificial intelligence at work. It takes into account your personal details like current financial situation and goals. Then, bumps it against “big data” and related trends to come up with a portfolio that will (ideally) help you reach your financial goals while adjusting along the way.
Robo advisors have a range of fee schedules and can be more or less than traditional advisory services fees. It’s not always the cheapest advisory service, but it can be surprisingly affordable in certain situations i.e. time-strapped people, little to no assets, etc.
Other financial services designations:
- Personal Financial Specialist (PFS™)
- Chartered Financial Consultant (ChFC)- Advanced financial planning
- Chartered Investment Counselor (CIC)- Advanced portfolio management
- Certified Private Wealth Advisor (CPWA)- Wealth accumulation, preservation, and distribution
- Chartered Life Underwriter® – Insurance planning
- Financial Fitness Coach- Educator, counselor or planner in the field of finance
- Certified Financial Education Instructor- Educator in financial literacy
What should I ask my financial advisor?
Perhaps even more important than a designation is knowing how your financial advisor is compensated. As mentioned before, some “advisors” are in the business of selling financial products, regardless of whether or not they are best for your situation. They will receive commissions for recommending products they represent.
In certain instances, this is not a problem if the financial product in question actually fits your needs. In other situations, it can present a serious conflict of interest. For this reason, you should find out exactly how your financial advisor is compensated if they are not charging any fees to work with you.
If you are willing to work with a fee-only advisor, you’ll have to shell out some money to compensate your them for their time. Also known as fiduciaries, fee-only advisors do not accept commissions for products they recommend. They are only compensated by the fees you pay them for their advisory services.
This could be a valuable trade-off if you are looking for objective, transparent financial guidance crafted in your very best interests. Fee-only advisors can be paid an hourly rate, be retained monthly or received a percentage of assets under management (AUM.)
In a nutshell, when it comes to getting financial help, there’s no time like the present to get started. In the beginning, you may not have the money to retain a fee-only advisor, but perhaps you can afford a 1-2 hours consultation to start. Just a few hours of advice each year could change your financial outcome for the better.
As you earn more and amass for wealth, you may need more guidance, but it’s important to start on the right path with your money so you don’t regret it years down the road (or lose time that your investments could be growing.) If you are wondering
- how to find a fiduciary financial advisor
- how to find a certified financial planner or
- how to find a financial advisor you can trust
You should know that GuideVine can connect you to some of the best financial advisors in the field that are both trustworthy and fee-only.
You can trust that advisors on GuideVine are:
- Properly registered – with the SEC or their state
- Pre-screened – through a civil, regulatory and criminal diligence to make sure they have good records
- Fiduciaries – which means they are legally obligated to only work in your best interest
- Experienced – on average they have 18 years of experience and manage $180 million each
Thank you for reading all the way!
Come visit us at guidevine.com