What Does A Financial Advisor Do
Financial management is a vital subject in everybody’s life. Whether you own assets worth $100,000 or $500 million, they should be professionally managed to ensure that you achieve your goals. What does a financial advisor do?
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
After all, financial well-being makes most of these goals possible. As a high net worth individual with an investment portfolio of $10 million or more, managing your wealth can be challenging, so you should consider getting a financial advisor.
But what is a financial advisor? And what do they do? This article by Pillar Wealth Management LLC will answer all your questions about financial advisors, and why you should have them as a high-net-worth person.
Pillar Wealth Management LLC is a wealth advisory firm that provides financial and Investment advice to high net worth and ultra-high-net-worth individuals who own assets between $5 million and $500 million.
If you fall into this class and need financial advice in managing your investment portfolio, schedule a free consultation call with Chris Snyder and Hutch Ashoo, the co-founders of Pillar Wealth Management LLC.
Table of Contents
What Does a Financial Advisor Do?
Financial advisors are professionals that are trained to provide financial services to individuals and organizations. They help their clients make better decisions about their finances.
What is the role of a financial advisor?
Your financial advisor wears many hats. By understanding the details of your financial situation, your advisor is able to advise you regarding how to achieve your goals for today and the future.
For example, to achieve your retirement goals, your advisor can help you with budgeting and savings, creating retirement accounts, and projecting your income for when you retire.
If you have money to invest, your advisor acts as an investment specialist, making recommendations based on your risk profile and income expectations. Your advisor can share their knowledge and expertise so that you understand your investments and become smarter about investing.
Financial Advisor Services
Financial advisors provide a broad range of services. Their services are designed to help you achieve your financial goals.
Financial advisors help their clients with controlling expenditures, budgeting, saving, and planning for major purchases.
Other financial services include:
Investment advice — investment recommendations are based on your risk tolerance and goals.
Debt management — the advisor develops a repayment plan.
Retirement planning — a retirement plan allows the client to anticipate a comfortable retirement.
Tax planning — your advisor can help you with your tax returns and how to minimize your taxes through deductions and managing capital gains.
Estate planning — this service ensures your assets are distributed to the beneficiaries according to your wishes.
Your advisor will develop a financial plan that reflects your goals and acts as a foundation for reaching those goals. Your financial plan is based on the current state of your finances as well as where you want to be in the future.
The data collected by your advisor includes your income and expenses, assets, and liabilities. It includes your current investments, bank accounts, retirement accounts, and any sources of income other than wages or salary.
In terms of investments, your advisor also wants to know about your risk tolerance, which will determine the kinds of investments you’re likely to favor.
Your financial plan can project your future income based on your current retirement plan and outline how you can increase your retirement income. Your advisor can help you regarding estate planning and insurance needs, if applicable.
Investment Planning and Monitoring
Your advisor will make investment recommendations based on your goals and risk profile. Your financial plan will include how these investments are made, the investment strategy, asset allocation and diversification, review, and monitoring.
By discussing each investment with your advisor, you will understand how that investment helps you reach your goals. Your asset allocation will reflect your risk tolerance, and the diversification protects you from worst-case scenarios.
As markets change and your financial situation changes, you can work with your advisor to adjust your portfolio to reflect these changes. Your retirement plan can be modified as you get older.
Your advisor should meet with you at least quarterly to review your investments, but you should let them know whenever there’s an important change to your situation, such as having a child or getting a divorce.
Finding a Financial Advisor
Finding an advisor takes time, but it’s important that you find an advisor that meets your requirements.
Do some research and select a few advisors that may be a good fit; for example, they have an office nearby; they work for a firm that is highly recommended, or they prefer passive to active investment.
Set up an interview with each candidate, and be prepared to describe your financial situation and your financial needs. Where do you need help? What are your goals?
You want an advisor who is transparent about how they are compensated. They should demonstrate that they are available to answer your questions about investments so you can make better decisions. By asking them about how they work, you’ll be able to reduce your list to the best candidate.
The Costs of a Financial Advisor
Financial advisors follow different compensation modes. Some advisors are paid only by their clients’ fees, so they follow the fee-only model. In this case, the advisor is much less likely to have conflicts of interest. Otherwise, they should reveal any conflict to the client.
An advisor that follows the commission-based compensation model is paid by commissions, which can give rise to conflicts of interest. Again, the advisor should be transparent about how they are paid.
A fee-based advisor earns fees from clients as well as commissions. Most advisors charge an annual fee that is a percentage of the value of the assets they manage for the client. So, their fees increase as the value of the portfolio increases, which is advantageous to both parties.
Robo-advisors are digital advisors, that is, computer programs that offer financial advice, generally about investments. They do not have a personal relationship with the investor. They cannot advise you on debt repayment or estate planning or help you decide when to buy or sell a stock. As a result, their fees are much lower.
Most of the large investment firms offer a digital advisor on their online platform, so they’re easy to access from anywhere at any time. They typically offer educational materials or trading tools that investors can use to make decisions.
If you feel unable to control your expenses or get on a good savings routine, you would benefit from expert advice. You need an advisor if you have money to invest but don’t know how to build a portfolio.
Financial advisors and planners offer the same services, but a planner may focus more on the overall financial situation of the client, whereas an advisor concentrates on investments.
They may quit because of the difficulty of building a clientele that will give them the income they expect, or they may find it difficult to maintain good relationships with clients.
A financial advisor should have a bachelor’s degree in a related field, such as economics or finance. They should invest in being certified, such as acquiring the CFP designation.
It’s mostly advantageous to have an advisor, but of course, it’s not free. So, be sure to understand how the advisor is paid to decide if you can afford to benefit from their advice.
You can benefit from using an advisor by simply paying an hourly fee ($200–$400) and getting some advice on your finances. For investing, you may need $50,000 or more.
If your finances are complex and seem out of control, you should use an advisor. You’ll benefit by having more confidence and feeling greater financial security.
You can check online to find out if an advisor has had any disciplinary judgments taken. Most advisors are required by their certifying body to be trustworthy.
Rich individuals who want to grow their wealth will use a financial advisor to get the best recommendations for investments, retirement planning, and general money management.
Evaluate if the advisor is meeting your needs, such as increasing your income from investments. With good communication and a shared understanding of goals, your advisor can be with you for decades.
Signs that You May Need a Financial Advisor
While many online articles and users can give you financial advice, sometimes you need a physical advisor that can offer you more holistic planning in person. But how do you know when you need a financial advisor? Here are some signs that may be a clear giveaway for you to consider your needs.
During Times of Personal Change
If you are experiencing times of change in your life, then you might want to see a financial advisor. If you are getting engaged, married, having a baby, or preparing for your kids to go to college, these are lifestyle personal changes, and you may need the help of a financial advisor to navigate these periods.
If you are contemplating getting into a serious relationship or just got engaged, especially as a high net worth individual, you should start having financial conversations with an advisor and your partner.
This is because money mistakes, mismanagement, and disagreements can affect the relationship negatively. If you’re expecting a baby, a financial advisor can help you adjust to that reality, as a neutral third-party.
A financial advisor can also assist with financial decisions like which kind of childcare plan to use when it is time to start planning for your kids’ college or your retirement. If you need professional financial advice in times of personal change, you can schedule a free consultation call with Chris Snyder and Hutch Ashoo, the co-founders of Pillar Wealth Management LLC.
You Don’t Have a financial plan
If you notice that you do not have a plan for how you use your finances, or your spending is becoming reckless, then it might be time to hire a financial advisor. One of the basic principles of financial management is to have a financial plan that you work with and stick to it.
If you are having trouble creating a financial plan that takes all your goals into account, talking to an experienced financial advisor and seeking advice is often the best thing you can do for your future.
A comprehensive financial plan is the foundation of a well-managed investment portfolio. As a high net worth or ultra-high net worth individual, it is important to have a financial plan that covers all your financial goals and remains flexible enough to account for the changes you might want to make in the future.
If you need more information about how to choose a financial advisor, our team at Pillar Wealth Management, LLC, created a valuable resource for you – receive your copy of The Ultimate Guide to Choosing the Best Financial Advisor: For Investors with $5 Million to $500 Million in Liquid Assets.
You don’t know how to manage your Investment Portfolio
As good as a financial plan is, it must be implemented for your goals to be achieved – failing to plan is planning to fail. Investing is one of the ways that you protect, manage, and increase your wealth, so it is vital that your investment portfolio is appropriately managed. If you are a high net worth individual with an investment portfolio of $10 million and above, then you might need more than a regular investment broker.
This is because most regular stockbrokers are not equipped to handle the complexities that come with large investment portfolios. Some financial advisors are specially trained and experienced in handling the challenges that come with a large investment portfolio. They will help you invest your capital in the most effective way, to build your net worth throughout generations.
You need help with Taxes and Insurance.
As a high net worth individual, your taxes and insurance might be more complex than those of the average person. Your taxes and insurance should be handled properly, or it could prove disastrous to your assets.
The help of a financial advisor comes in handy here. They are usually experienced in handling tax, insurance, and other financial matters that are peculiar to high net-worth and ultra-high net worth individuals.
If you’re interested in finding out how your assets and estate can be better managed, request for your free copy of our hardcover book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies for Families Worth $25 Million to $500 Million. Our team at Pillar Wealth Management will ship it to your home for free.
Is it worth getting a Financial Advisor?
Now, let us consider if it is worth it to hire a financial advisor. The first thing to do is to look at the alternatives. How else can you manage your wealth if you don’t use a financial advisor? The first and most obvious option is to manage your finances and invest by yourself.
This is, of course, the cheapest course of action, but it will also be the most challenging. While you do not need to pay any advisory fees to a financial advisor, if you manage your finances yourself, there is a rather obvious downside to doing so – especially when you think of the mistakes you may make down the road. The opportunity cost of that mistake is often far greater than the percentage paid to an experienced advisor.
When it comes to managing your assets between $5 million and $500 million, specialized knowledge is likely needed. You would need to be knowledgeable in investing, accounting, tax planning, and estate planning. You would also need to develop many other fiscal management skills.
If you lack any of these skills, you can potentially lose a lot of your money – or miss out on opportunities you didn’t even know about. For example, if you don’t have the required knowledge at handling taxes, you might unknowingly be guilty of tax evasion, which can be very expensive. In addition, maybe you hear of a high-risk stock from a friend and decide to put a significant amount of your net worth into it – only for it to lose a significant percentage in a short period of time.
Managing your finances personally might not be the best idea unless you have the required knowledge and skills. If you want to live a life that is enhanced by your wealth, instead of entirely focused on it, there is a better way than to do it alone. The right type of financial advisor can turn your wealth into generational wealth.
If you would like to receive information about improving your investment portfolio, get our free guide, Improving Portfolio Performance: The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity. This guide was prepared by Pillar Wealth Management, a wealth management company that caters to high net worth and ultra-high net worth clients with $5 million to $50 million in assets.
Another option for managing your wealth is to use a Robo-advisor. A Robo-advisor is a computer algorithm that decides the best place to invest your money when you put it into an investment account. The Robo-advisor takes your financial goals, risk appetite, and a host of other factors into account and then manages your investment portfolio as best as possible.
From the information that you provide, the algorithm will determine how long you need to invest, how much you should invest, and the asset classes and vehicles that you should invest in. This method of portfolio management may work if you lead a simple financial life.
As a high net worth individual, however, you will probably need several services that require complex financial skills and knowledge. Therefore, this type of wealth management would most likely not work for you, the affluent investor. To know more about managing your investments, you can schedule a free, no-obligation call with Chris Snyder and Hutch Ashoo, the co-founders of Pillar Wealth Management LLC.
A financial planner is another option for managing your finances and achieving your financial goals. The job of a financial planner is to help you develop a solid plan for your investment portfolio. This plan, when thoroughly made, will guide your savings, expenses, and investments.
It can be likened to a financial blueprint that describes how you are going to achieve your financial goals and will include several things, such as the kind of insurance that you should get, how to diversify your investments to minimize risk, and so on. The major challenge of using only a financial planner is with the implementation of the plan.
A financial plan for a high net worth individual with $5 million to $500 million in liquid assets is likely going to be complex, and most financial planners cannot directly invest, so implementing the plan becomes a major challenge.
Creating the Financial Plan
Let’s look at how a financial planner helps you create a comprehensive financial plan to ensure that you achieve your goals.
First, the financial planner will help you take your goals for the future and expand on them to create a comprehensive wealth management plan. This process is a lot more complicated than it sounds and requires a fair bit of financial, technical know-how.
To understand what your goals are, the financial planner will likely have you fill a survey. This survey will detail your current financial situation, capture your financial goals, and understand your risk appetite. This information is then used to determine your investment objectives.
Once your financial planner understands your needs, they will then determine how realistic your goals are. A financial advisor may use various tools such as a capital needs analysis to see if it is possible to reach your goals. To achieve this, they will compare your assets and liabilities to determine the cost of meeting your goals.
Once the plan is created, you will be faced with the issue of how to implement it. As we stated earlier, many financial planners do not know enough about the financial markets to offer the best possible advice on investments. In addition, a financial planner cannot sell you the securities you need to achieve the goals set on your plan.
You could decide to use an investment broker to manage your investment portfolio actively. Investment brokers, also called stockbrokers, help you purchase the investments and securities that you need to meet your plan requirements.
Investment brokers understand stocks, bonds, and mutual funds and can help you diversify your portfolio. However, they are not always involved with creating long term plans, which is why you will still need to work with a financial planner.
However, there are two major problems with working with a financial planner and an investment broker. The first problem is that it might be hard to get both professionals to work together, which can be detrimental to your portfolio.
The second problem is that a stockbroker can decide not to act in your best interest. Most stockbrokers get paid on commission, which means that they are paid when you buy or sell a security. The amount that they get paid varies from one security to another.
This might seem simple enough, but it opens the door for your broker to advise you on securities that give them more commissions but are not in your best interest. As long as the stockbroker provides you with advice that falls within the scope of what you require, then it is perfectly legal.
This is the advantage that financial advisors have over regular stockbrokers.
Pillar Wealth Management financial advisors can help high net worth and ultra-high net worth individuals.
Registered investment advisors are bound by something called a fiduciary duty. Fiduciary duty means that your wealth manager is bound by law to always act in your best interests. This is the major difference between a general investment broker and a financial advisor.
A registered wealth advisor has an obligation, backed by law, to always act in their client’s best interests. Therefore, you can be sure that your financial advisor will give you the best possible investment advice that they can.
Pillar Wealth Management LLC is a wealth management firm that caters to high net-worth and ultra-high-net-worth individuals. If you have assets worth between $5 million and $500 million, you can schedule a free consultation call with the co-founders of Pillar Wealth Management LLC, Chris Snyder, and Hutch Ashoo.
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