You understand the importance of managing your money, but that doesn’t necessarily mean you have the skills or financial understanding to do it yourself. It is best to turn to a professional, like a financial advisor, to help you manage your money.
Start by Deciding What Finances You Want Help With
You can work with a financial advisor to manage as many or as few aspects of your life as you want. This is important as top financial advisors will offer investment advice for things like debt repayment and retirement. They will also help with estate planning and maybe even suggest insurance products that protect your finances and those of your family.
If you are still fairly young, then you may want to start by focusing on retirement planning. However, everyone is different. You may want financial advice and planning assistance for major financial goals, such as saving for your children’s college tuition or buying a home.
Choose Specific Services
This is the time to choose the specific services that you want to take advantage of from your financial advisor. The most common include:
- Budgeting help;
- College planning;
- Debt management;
- Estate planning;
- Insurance coverage;
- Investment advice;
- Retirement planning, and;
- Tax planning.
Many financial advisors also help with financial planning and provide perspective and support when the economy is volatile.
As you think about which services you want to take advantage of, remember that the services offered vary by financial advisor. Ideally, you will find one who offers all the services you need.
Make Sure You Understand the Financial Advisor Types
You may not realize it, but there are several types of financial advisors.
Most importantly, make sure you understand how your chosen type of advisor earns their money. You want someone who has a fiduciary duty, which legally requires them to make suggestions that are in your best interest financially. This contrasts with advisors who can suggest products that earn them the highest commission.
Fee-Only vs. Commission Financial Advisors
One major division among types of financial advisors is whether they only make a profit from the fees they charge you or if they earn commission as well. Some may earn money with both methods.
If you want to ensure that your best interests are followed, a fee-only advisor is smart. Most fee-only advisors qualify as fiduciaries.
By contrast, those that work solely on commission are not fiduciaries. If their services are free, this means they are paid to sell insurance and investment products. As such, they are more likely to push their products than the ones that are best for you.
Consider Your Budget
While a fee-only advisor will always have your best interests in mind, they may not always fit your budget.
That being said, commission-only advisors frequently claim to offer “free” services. While their advice is free, remember that it won’t be tailored to you. It will be based on what they are sold to promote. So, you may miss out on opportunities.
Because of that, it is best to opt for a fee-only or fee-based financial advisor if possible. Pay attention to their fee model. Some follow a subscription model, while others charge by the hour, via retainer agreements, or as a percentage of the assets they manage.
Make sure that you understand what you will have to pay for a given financial advisor and how much you can afford to spend on their services.
Look for a Financial Advisor
With all of the above in mind, it is time to start looking for your financial advisor. As with anything else, you can ask family and friends for recommendations or look online to find advisors with good reviews.
Another great option is to look at the databases maintained by financial planning associations.
What to Look for in Your Chosen Financial Advisor
When you first consider a financial planner, ask about their background, credentials, and fee structure. You should also check whether they have complaints filed against them or have faced disciplinary action.
Before choosing a financial advisor, ask whether they are fiduciary. If they are, ask if they always act as one. Other questions to ask include:
- How do they make their money?
- What is their approach to financial planning?
- What kind of clients do they commonly work with?
- What services do they offer?
- How frequently do they prefer to meet with clients?
- Do they work with other advisors, such as attorneys or CPAs?