Do you know how to choose a financial advisor? If you are like many people, you might need a hand in managing money. According to National Financial Education, not knowing how to manage money can cost you $1200 every year. Finding a certified financial planner can help you avoid the costs and focus more on the goal. Certified financial planners are not just for the rich. Anyone can use their services. The following are some of the ways to find the best financial planner.
How To Choose A Financial Advisor
Decide Which Areas Of Your Life You Need Help
Which Advisor Fits Best To You?
Before you speak to a financial planner, you should identify which areas of your life financial help you require. The best financial advisor will be one who will be ready to work with your needs. You should also know that financial planners do more than just investment advice. The best ones are those who list down your financial needs. This setup could cover retirement plans, loan repayment, insurance payments, mortgage, or how to take out a mortgage.
What’s your stage of life?
Of course, all this depends on where you are in life. For instance, if you are fresh out of college and just landed your first job, you will only need help with college loans or retirement planning. However, if you have a family, you might need more financial help. For instance, you are setting up a college fund or trust, learning how to repay the loans, and solving tax problems. There might also be investment needs that you have to consider for the future.
Understanding The Different Types Of Financial Planners
There is no law out there that will tell you who is a financial planner and who is not. This circumstance is why you must sift through potential financial planners carefully. Before you understand the different types of financial planners, you need to understand the concept of fiduciary duty. Some financial planners are required to work in your financial best interest. Others work according to suitability standards, which means they only suggest suitable products for you. It doesn’t matter how expensive they are or if they earn them a higher commission. One of the first things you should do is determine if their recommendations are better for you or them. The key is to understand how they make money.
Fee-Only Financial Planners
They earn money from the fee you pay for their services. The cost can be a flat rate, hourly rate, or a percentage of the assets that the financial planner manages. Most financial planners prefer to work under a fee-only model to eliminate conflicts. Since their income depends entirely on the fee you pay, they make sure to lay out the best financial products and plans for you.
Commission Earners
Some certified financial planners earn money through sales commissions from third parties. Any of them may claim they offer free advice. Others might charge a fee which they take from third-party commissions. However, financial advisors earn sales commissions from third parties by selling you financial products. If you do decide to work with such people, you should be more careful.
Commission-only financial planners are not fiduciaries. They are working as salespeople for insurance and investment firms, and they only conform to suitable standards. However, some fee-based financial planners are fiduciaries, and you have to figure out if they are acting as fiduciaries or not before you buy the product from them.
Registered Investment Advisors
These are companies that provide fiduciary financial advice, and they have to conform to fiduciary duty. Some RIA companies hired hundreds of IARs working for it. Furthermore, these can term themselves as financial advisors, and they can work fee-only or fee-based. Some may have additional credentials, such as certified financial planners. These are people who have passed exams covering topics such as real estate, investment, and insurance planning and have several years of experience.
Because of this experience, certified financial planners suit best to help you in your economic life. They can manage debts and build your trust funds.
Robo Advisors
At your research for how to choose a financial advisor, you may already found Robo Advisors. They are automated advice at a low cost. Robo Advisors specialize in helping people to invest in retirement funds or exchange-traded funds. Robo advisors like Vanguard should be the ones to turn to for the younger people who don’t have too many financial needs.
Choosing The Services You Want
The following are some of the services that financial advisors offer. You can choose from them:
- Investment advice
- Debt management
- Budgeting help
- Insurance coverage
- Tax planning
- Retirement planning
- College planning
Decide The Fee
Financial planners earn through a flat fee or through a percentage they make from managing your asset. They may charge a fee by the hour or by the plan they draw up. So you sit down with them and decide accordingly.
Researching Financial Advisors
Since there are so many financial advisors out there, you should do your research before choosing the one you trust. Make sure their credentials are up to mark, and they have the expertise to guide you. Remember, just because someone is associated with the financial institutions does not mean that they are a fiduciary financial advisor.
How Much Does A Financial Advisor Make?
The certified financial planner does earn a lot as it is one of the lucrative fields out there. According to the US Bureau of Labor Statistics, a financial planner’s average salary is $90,350. At the lowest level, people earn $41,160 while at the other end, they earn $208,000. However, don’t just be dazzled by how much they make. Remember, this field is ambiguous, and you have to weed out the financial planner who can meet your financial needs. They do not always have to do what is right by you, which is why you should opt for a fiduciary.
The Bottom Line
Go with the type of financial advisor who can help you to achieve your goals. If you are confused, google financial advisor near me and let Google point out where you need to go. Now, you are one step closer to having well-managed finances and achieving the financial goals you have been putting off.
