Do I Need a Financial Advisor?

But what can you do if you want to change your situation? That’s where a financial advisor can help. This article explains whether you need a financial advisor, while also clarifying what they do, and whom they work with.

Do you already understand what a financial advisor is, but need to know how to select the right one for your family? If you have an investing portfolio with $10 million or more, download The Ultimate Guide to Choosing the Best Financial Advisor for Investors with $5 Million to $500 Million in Liquid Assets from Pillar Wealth Management, LLC.

What is a financial advisor?

Simply put, financial advisors help you manage your finances. However, the term financial advisor can refer to a number of professionals that help manage your money, buy investments, purchase insurance, and much more. There are even financial advisors that help you reduce your tax liability or minimize investment risk. As you can tell, this general term is a catch-all that’s widely used. It’s important to understand the different types of financial advisors that are out there so that you can select the right person to help you achieve your financial goals.

Why are financial advisors important?

What are the big goals you’ve set for yourself? Most common goals are wanting to purchase a home and save for retirement. But how do you get from where you are now to where you want to be in the future? There’s where financial advisors come in.

Essentially, they review your current finances, create plans, recommend investments, and explain strategies to get you where you would like to be in the most efficient manner – including minimizing unnecessary taxes. Let’s face it, money management can be confusing at the best of times.

With a financial advisor, you’ll have an invaluable resource that will resolve your specific financial questions and concerns, and even bring to light ones you were not thinking about.

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What are the distinct designations of financial advisors?

There are two traditional professionals that are referred to as financial advisors. These are Certified Financial Planners and Investment Adviser Representatives. Here’s the difference between the two.

Certified Financial Planners

One type of financial advisor is known as a Certified Financial Planner, or CFP for short. CFPs will sit down with clients to create a financial plan. This plan will take both your long- and short-term goals into consideration and should address saving, investing, retirement, insurance and much more.

As you can tell, a plan created by a CFP comprehensively considers your financial needs throughout your life. And these financial advisors have the education and experience to help you build your own unique financial roadmap.

To receive a CFP designation, they’ll hold a four-year bachelor’s degree or higher level of education and complete thousands of hours of on the job experience. Additionally, they receive certification from a CFP Board, which is granted after passing a test on several financial planning courses.

However, just being a CFP does not mean that non-CFPs cannot build financial plans. Often, investment advisors with years of experience have a better handle on how to build a financial plan because they have managed finances through clients’ lifetimes.

There are plenty of programs that run monte-carlo technology that are available to both. Sometimes, experience with clients can outweigh what is taught in a textbook.

Registered Investment Advisers and Investment Adviser Representatives

The next type of financial advisor is known as an Investment Adviser Representative, or more succinctly, an IAR. The IAR works for a Registered Investment Adviser.

When you hear the designation Registered Investment Advisor (RIA), it sounds like a title for an individual financial advisor. However, this term most commonly refers to a firm instead of a single person. In most situations, even the people that own an RIA firm will still work as an IAR in their own business. So, what exactly does it mean for a firm to have the designation of RIA, and what do IARs do specifically?

Most people’s first thought whenever they hear the term “financial advisor” usually fits in with the role of an RIA firm. RIAs manage the investments of high net-worth individuals.

The IARs in the firm will create specific investment portfolios that include stocks, bonds, and other securities to grow the wealth of their clients. In return, the RIA will earn an annual management fee. And because RIAs work for a fee, they are regulated by the Advisors Act of 1940.

The Securities and Exchange Commission (SEC) is the governmental entity responsible for protecting investors in the United States and they enforce the Advisors Act of 1940.

To establish an RIA, an individual must first pass the Investment Advisors Law Exam and then register with either their state or the SEC. After all the steps of setting up an RIA are complete, that firm is held to a fiduciary capacity and must manage investments in a way that are best for their clients. This is different from other forms of financial advisors, as not all are held to the same fiduciary standard.

Having an advisor that works for an RIA does require that you have a high net-worth, but you’ll receive a higher level of service due in part to the protection from federal laws.

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Which services do financial advisors perform?

Now that you understand the various designations traditional financial advisors hold, let’s discuss the two most common services they perform. Although asset management and wealth management sound similar, they’re actually two main financial advising services. Here’s what asset managers and wealth managers do.

What are Asset Managers?

An asset manager does exactly what their name implies. They help manage your assets and more specifically your investment portfolio. Essentially an asset manager will review your financial situation, help you reduce your investing risk, and recommend that you purchase certain investments.

The investments your asset manager recommends will depend on several factors including your age, your risk tolerance, and your financial goals. Some asset managers are specialists and focus on helping people invest in certain asset classes, while others are generalists and understand a variety of investment options.

What are Wealth Managers?

Whereas asset managers help you manage your investment portfolio, wealth managers focus on everything that concerns your financial life. They generally offer a comprehensive level of service that will involve asset management, but can also help with retirement planning, tax planning, estate planning, and more.

Your average asset manager might consider growth of your portfolio over a year or several years. Wealth managers on the other hand look at building your wealth and protecting it for future generations.

Who should have a financial advisor?

So far you have a grasp on the designations and the roles of financial advisors. But who should have a financial advisor? And which type of financial advisor should you select? Like everything that has to do with financial management, that depends on your individual situation. These suggestions discuss times where you may consider a financial advisor.

 

When you would rather leave money management to a professional.

For some people, having money is a means to an end. If you would prefer to let a professional manage your investment portfolio or financial life, then you’re need a financial advisor.

On the other hand, if you’re someone that enjoys comparing stocks, finding investments to hold in your portfolio, and planning your financial future, perhaps you won’t need a financial advisor to help with every aspect of your financial well-being. Instead, you can focus on finding advisors that assist you in areas where you need the help of a specialist.

If you need someone to help you build a secure financial footing.

Perhaps you’re not certain about how to deal with a financial situation, or you’re looking for assistance with reaching your next goals. There are certainly financial advisors that can help you with the basic or more advanced aspects of money management.

You might only need an advisor to help take control of your debt, or one that will help you get started with a retirement account. If you want to work toward a specific financial goal, then an advisor can help you get there.

Whenever you want to expand your knowledge about investments.

There are financial advisors available to simply provide knowledge on various aspects of managing your finances. Some provide educational resources and others will help you build a plan that suits your needs.

If learning about a specific investment interests you, consider looking for a financial advisor that specializes in that product. Advisors are an invaluable learning resource and can help you become more financially literate.

Those who have complicated financial situations.

Whenever an investment professional is asked who should have a financial advisor, those with complex financial situations are right at the top of the list. If you are a high net-worth individual or you have a complex financial situation, then you should absolutely work with a financial advisor.

Managing your own investment portfolio alone can easily be a full-time job. And there are no guarantees that you can outperform a professional if you do the work yourself. In these cases, it’s best to let a financial advisor take care of any asset or wealth management services that are too complicated for you to handle by yourself.

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Why you need a financial advisor?

As humans, we enjoy saving money whenever we feel like we can accomplish something ourselves. However, even if you can organize your investment portfolio or manage your wealth, there are several good reasons to have a trusted financial advisor working with you. Here are a few reasons why you need a financial advisor:

First, they’ll help keep you accountable. When you discuss your income, spending, saving, and investing regularly with someone, it’ll be much easier to stay on track.

The second reason why you need a financial advisor is because he or she will help free up your time. You likely have a career you care about, a family, and hobbies.

Trying to reduce your taxes, diversify your investments, select insurance policies, and other financial tasks is complicated. However, there are financial advisors out there that specialize in these fields and can do this work for you, so that you can focus on what you love.

Where can you find a financial advisor?

If you are looking for a financial advisor, there are a few places you can turn. So, where can you find a financial advisor? To locate one in your area, start by asking friends and family. Additionally, you can receive recommendation from coworkers, your management team at work, or even bankers at your financial institution.

But what happens if no one in your network can answer the question, “where can you find a financial advisor?” Well, in that case, consider searching financial advisor accreditation websites or financial services organizations online. And if all else fails, you can always turn to online search engines.

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Best tips for finding a financial advisor

Now that you know how to start your search, here are the best tips for finding a financial advisor:

• Understand your financial needs before speaking with a financial advisor. What’s your current financial situation? Which aspects of financial management do you need assistance with? What’s your current budget? These questions will guide you to the right company, team, or advisor for help.
• Know the specific type of financial advisor you want. Perhaps you want to learn about certain investing methods from a specialist. Or you may need a financial advisor that can plan your retirement account or full financial future. Get specific about what you’re looking for in a profession. By doing so, you’ll have an easier time connecting with someone that works with people in similar situations as yourself.
• One of the best tips for finding a financial advisor is to conduct interviews. Once you’ve located a firm and an advisor that you’re interested in, get to know him or her. Understand their management methodology, judge their communication skills, and discover whether you’re a correct fit for each other. Don’t hesitate to interview several people before selecting the one that’s right for you. After all, the advisor you select can make a tremendous impact on your immediate and future financial success.

Ready to find your financial advisor? Start on your journey to financial freedom.

Financial advisors perform a wide range of services and go by several different titles. The type of professional that your family requires depends on your current financial situation, and where you would like to be in the future.

Now that you know exactly what an advisor can do for you, get started on your search. With a little effort, you can find one that will help you accomplish your financial goals at price that matches your budget.

Would you like to discover how financial advisors help high and ultra high net-worth individuals? Schedule your free consultation with Pillar Wealth Management, LLC. co-founders Hutch Ashoo and Chris Snyder today. We specialize in helping families with $5 million and up to $500 million in investable liquid assets.