What Is a Financial Advisor?
Before you go out searching for a financial advisor, it’s important to understand what these advisors do and don’t do when it comes to financial planning and advice.
First and foremost, financial advisors help you decide what to do with your money depending on what your financial or savings goals are, your timeline to meet those goals and any life changes that may impact that timeline.
What Does a Financial Advisor Do?
Financial advising is a broad term, and you may encounter professionals with titles ranging from a certified financial planner to an investment advisor and wealth manager. Depending on the type of financial advice you’re looking for and the services you need, your financial advisor may:
- Create a personalized financial plan designed to meet your specific goals.
- Advise on several financial topics, including retirement, investments, real estate investments, taxes, and estate planning.
- Help you understand how the steps you take today will impact your future goals and financial standing.
- Operate under the “fiduciary standard” which dictates advisors must always place clients’ best interests first.
How Much Does It Cost to Hire a Financial Advisor?
Financial advisors typically work off three common fee structures. While researching advisors, you may see the following terms:
- Fee-only advisors: paid solely by their clients, with fees usually based on a percentage of a client’s assets under management. Almost all fee-only advisors are fiduciaries, limiting conflicts of interest to keep your needs first.
- Fee-based advisors: paid through a percentage of a client’s assets under management as well as through commissions on products sold. Some fee-based advisors are fiduciaries.
- Commission-only advisors: paid solely by commissions from products sold paid out by third parties. These advisors are not fiduciaries.
When to Hire a Financial Advisor
Now that you have a better idea of what a financial advisor does, it’s time to decide when’s the right time to bring one on board to help with your investments and future financial planning. Here a few situations in which it would benefit you to hire a financial advisor:
Doing It Yourself Is Not a Viable Option
Like we mentioned earlier, it may be possible to self-manage your portfolio, savings, budget, taxes, insurance, estate planning, and the list goes on and on. However, taking on this job yourself calls for ample resources in the way of time and knowledge. And even if do devote yourself to understanding financial planning, there may be certain information only certified professionals can access. For most investors, a DIY approach is not a viable solution, especially if you’re looking to optimize your portfolio and maximize your returns.
You Need to Organize Your Investments
From 401(k) accounts from previous employers to traditional or Roth IRAs, money markets and bank accounts scattered across multiple institutions, staying on top of all of your finances can be tricky. If you don’t know where you stand today, planning for tomorrow becomes a guessing game, which may leave you in a less-than-desirable position in the future.
A financial advisor can help you consolidate retirement savings accounts, give you a clearer picture of your current financial standing and help you develop a financial plan that works cohesively across your accounts. More than that, a financial advisor offers ongoing support. That means they’ll manage your money to not only get you on track but also keep you on track toward your financial goals.
Before Making a Big Life Decision
In life, we all need to make several big decisions with the potential to change the way we live from there on out. Sometimes, these decisions can even affect future generations of your family, so taking care to make the right choice is beyond important.
With a financial advisor by your side, you don’t need to make those calls alone or without all the details you need to make an informed decision. More than having access to the tools and experience needed to help guide you toward a more financially sound option, advisors offer objectivity—their goal is to find the best possible way to manage your money, taking things like emotion out of the equation to leave just the facts.
To Gain Peace of Mind
One of the biggest benefits hiring a financial advisor offers can’t be measured on paper. Being able to breathe a little easier knowing your money’s in good hands is priceless. And while there is always a certain level of risk associated with investments, having a professional with experience, expertise, and a fiduciary duty to put your needs first is a confidence booster.
Beyond the assurances offered by an advisor, you can also count on them to manage your living expenses and track your spending to ensure you stay on track toward your goals. It’s peace of mind today and a solid foundation for tomorrow.
How to Choose a Financial Advisor
If by this point in the article you’ve determined now’s the time to make moves toward hiring a financial advisor, the next question you may be asking is how to find and choose the right advisor for you?
First, you need to determine the types of services you need and where your financial goals lie. Next, you’ll need to do your research. Do you know any wealth management professionals through friends or family members? What are reputable advising companies or individual advisors in your area? Does your financial institution offer financial advising in-house?
Once you reach the stage of meeting with advisors for a consultation, it’s a good idea to have a list of questions ready to help you vet potential advisors. These could include:
- How are you compensated?
- Are you a fiduciary? Are you always acting as a fiduciary?
- What fees are associated with your services? What are the “all-in” costs?
- What are your qualifications?
- How will we work together?
- What is your approach to financial planning?
- Do you have any conflicts of interest in managing my money?
- What kind of clients do you normally work with?
- Who is your custodian? Who holds my investments?
If you’re not quite ready to hire a traditional financial advisor, there are other options available. Robo-advisors offer lower-cost investment management and can help you with things like retirement planning. There are also online advisors with who you can meet virtually to answer any questions you might have. At Go Energy, we also have consultants in branches to help guide you in the right direction. Wherever you are on your financial journey, it’s never a bad idea to seek out a bit of support.