Finding a Financial Advisor or Planner

Getting Your Financials Right

You may have noticed how complex and important saving, investing, maximizing the value of your wealth, and planning for a safe, comfortable retirement can be. If so, you've probably asked yourself how to find a financial planner or advisor and why you might need one.

You may also have felt the pressure of making a big financial decision. Whether it is buying a home, investing in further education, or managing the finances for a wedding, birth of a child, divorce, death of a spouse, or major illness, you've probably wondered how a financial advisor could help.

Services of Advisors and Planners

The National Association of Financial Planners estimates that only 30% of investors have a paid financial advisor. 57% of those without an advisor say they prefer to manage their own money, while 95% with an advisor say they believe the advisor is worth the money.

 So what kind of services do financial advisors and planners provide? Broadly, they can help you manage your financial life using various strategies and products to manage your wealth and improve your financial habits.

Types of Financial Advice

Not all financial advisors are the same. Some specialize in certain practice areas, types of clients, income levels, investment strategies, and products. Some work with clients all over the country, while others focus on clients in their town. Some can help you with your taxes, insurance needs, or estate planning, and others will focus on retirement planning. There are advisors for the younger client, and some specialize in retirees. You can find a planner to help with life stages planning, estate distribution strategies, and business planning.

From managing every aspect of your personal or business financial life to simply suggesting directions, specialized professionals are available to help.

Reasons to Seek Financial Advice

You may need a good financial advisor for many reasons. For example, perhaps you just received a considerable sum of money from a relative who died or a windfall from the state lottery. As a person goes through different stages in life, their need for a financial professional will change.

Perhaps you just had a baby and want to ensure their future in case the worst happens. Many parents seek help for college savings for children and setting up estates that can convey wealth to future generations.

The approach to investing at or during retirement is different than that of a young worker. As you near retirement, your risk tolerance level will change, and your investing style should change as well. Perhaps your company is offering a too-good-to-resist early-retirement package, and you want to make sure the money lasts. Any of these events (and many others) could naturally trigger the desire for some professional help in managing your financial affairs.

How to Find Good Financial Help

How should you go about finding the right advisor? The first step is to figure out what sort of professional financial help you need. Like many people, some of your deepest economic thinking comes at tax time. So if you want someone to dole out tax advice and preparation, an excellent certified public accountant (CPA) will probably suffice. That CPA may or may not also be a financial advisor.

Investment Management: Financial Planners

Financial planners are professionals who help businesses and individuals create investment plans that meet long-term goals.

Say you're looking for help in creating a savings plan, devising investment strategies for your investment portfolio, getting out of debt, and start saving for a house. In short, if you want someone to look at your entire situation, you should seek the help of a comprehensive financial planning firm or an individual financial planner.

Firms typically have a staff of professionals that includes a financial planner. Solo-practitioner planners may not be able to provide you with the full range of services that a firm can, but many will work hand-in-hand with other professionals who can provide those services.

Managing Money: Financial Advisors

A financial advisor is a broad term that covers many types of professionals. They may help you manage your investments by facilitating the buying and selling of securities. These individuals include bankers, accountants, stockbrokers, insurance agents, and estate planners. Financial advisors handle a wide range of money matters for individuals and businesses, while financial planner handles more specialized matters.

Financial advisors may work in independent practices or as part of a firm or financial institution. All advisors who work with the public must have a current Series 65 License. The National Association of Personal Financial Advisors (NAPFA) is a good place to start your search for help.

Fee-Only vs. Fee-Based

A fee-based structure can be hourly, project, retainer, or a flat ongoing amount derived from the percentage of assets being managed, and usually, the greater the assets, the lower the percentage. Commission-based means the advisor charges a straight commission every time a transaction occurs or a financial product is purchased.

Commission Based

Although most of the big retail brokerages offer financial planning services, be cautious with their personnel. While many are highly trained and trusted, others may just be glorified stockbrokers hired by large wirehouses to sell proprietary mutual funds and stocks. Known as fee-based, they are incentivized, sometimes even required, to push these products, which are owned by their firm—and for which they receive top commissions. With some wirehouses, it's all about quantity, not quality.

But be aware: the more buying and selling a broker does in an investor's account, the higher the commissions generated.

Fee-Only

Another type of advisor is the fee-only advisor. These professionals carry designations such as registered investment advisor (RIA) or investment advisor representative (IAR). They are held to a high degree of accountability, and you'll typically find them among the more knowledgeable in their field. They are also required to provide to all potential investors upon request a Form ADV Part II. This form is a uniform submission used by advisors to register with state regulators and the Securities and Exchange Commission (SEC).

Form ADV Part II—which must be completed each year—contains information about the individual. Among other things, this will allow you to determine whether your advisor has ever applied for personal bankruptcy and their investment in other financial institutions. The form identifies the individual's investment style, officers of the firm, and the firm's assets under management (AUM).

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