How to Choose a Financial Planner Who’s Right for You
See Which of These 5 Types of Financial Advisors Is Your Ideal Match
Choosing the right financial planner isn’t all that different from choosing the right person to marry.
This article will break down the confusion you may have about the various types of financial planners and which one is ideal for you.
You’ll be introduced to five types of financial planners. For each one, you’ll learn which type of investor that planner matches with the best, and when you might want to seek another option. We’ll also share a number of other resources to help you further narrow down your search for investment help.
Do I Need a Financial Planner?
If you’re still asking this question, go through these 7 reasons why you might need a financial advisor.
If you don’t feel those reasons apply to you at this point in your life, then you can probably keep on managing your finances on your own for now.
But most people would do better with some financial planning help. Without financial planning, many are missing out on greater growth and financial security they could be achieving, or they’re exposing themselves to undue risk by making unwise choices.
1. Wealth Manager
Ideal For: Investors with Over $1 Million in Liquid Assets
A wealth manager does everything a conventional financial planner (option 3) does, but also much more. Wealth managers work exclusively with high net worth and ultra high net worth households.
They cater to this group because investors with this much money have to grapple with situations that people with less savings rarely face. Whether talking about estate planning, tax planning, building a fully customized investment portfolio around your short and long term goals, or achieving optimized investment growth, a wealth manager should understand how to deliver these outcomes for high net worth individuals.
With greater wealth come greater stakes.
If a person with $100,000 makes an unwise tax decision, it might cost them a couple thousand dollars. If a person with $5 million makes that same unwise decision, it may cost them hundreds of thousands.
The weight of each decision compounds and multiplies when your wealth stretches into these levels. To succeed, you need personalized, individualized help. A Robo-advisor or computer can’t do this. And a conventional discount broker’s advice or financial planner with hundreds, or thousands, of clients all using the same plans can’t do it.
Your challenge is, not all wealth managers are created equal.
For instance, do you want to talk to the same person every time you call, or a random new person each time who understands little of what you’re dealing with?
More than that, do you want a wealth manager who knows you? We can’t speak for others, but at Pillar, we know our clients’ names, their kids’ names, their businesses, their values, and their priorities. We golf with them. We meet with them to talk about their plans for their kids’ education.
When they have meetings with their CPAs, lawyers, or estate planning attorneys, we’re there too.
You can’t find a typical financial advisor (or even many wealth managers) who do all this. Partnering with us means more than just a transactional relationship. We’re part of your life, because we want to maximize your success in every possible way.
If you’ve risen into the ultra high net worth category, we created a special eBook for you: The Ultimate Guide for Choosing the Best Financial Advisor for Investors with $10M – $500 Million Liquid Assets.
Find out more about this unparalleled resource here
For a simpler starting place, here are 10 questions to ask your prospective wealth manager.
When a wealth manager is not right for you:
This part’s simple. If you have under $1 million in liquid assets – so this excludes your house, cars, artwork, and other tangible items – then you should look for a more conventional financial planner.
All the remaining options on this list fall into this category. So if you have over $1 million in liquid assets, you can stop reading here. You need a wealth manager. Now, you just have to find one.
And to be clear, wealth managers aren’t being snooty. The time required to effectively serve the needs of people with assets and investments at these levels far exceeds what a typical financial planner spends on developing and monitoring portfolios for people with $250,000.
Wealth managers typically have fewer clients, because they spend more time serving each of them. Look at the description given earlier. No advisor from Schwab or Fidelity is out golfing with their clients, or attending estate planning meetings with independent lawyers and CPAs. And that’s not to be critical of them. It’s just a different level of service, for a different clientele.
2. Stock Broker
Ideal For: Risk-Taking Investors Who Prefer to Be Active in the Market
A stock broker is distinct from a financial advisor or wealth manager in that they focus on buying, selling, and trading equities. The do-it-yourself version of this is the day trader. Within this term, many more specializations exist, such as focusing exclusively on futures and options, or commodities, or specific market sectors.
But all of these fall into the same category because the goal isn’t to plan out your financial future and help you make decisions about choices, goals, and unexpected situations that arise in your life.
The goal of the broker is to make money off the stock market, and to charge fees every time they make moves. This is for the investor who likes the game and is willing to put their savings at risk for a potential windfall. It’s not so different than gambling in this sense. For the person this option appeals to, they believe they have better odds than tossing coins in a roulette wheel.
When a stock broker is not right for you:
If your primary focus is on your long term growth, financial security, optimized investment performance, and the achievement of your goals and lifestyle dreams, then a stock broker is not your best match.
This is the most risky version of the five types of financial planners. It’s also the least likely to deliver long term stability. And it will cost you higher fees and taxes each year. Pillar does not recommend this option for almost anyone.
3. Financial Planner/Advisor
Ideal For: People with Six Figure Savings Who Need Personalized Attention
This is the broadest category of the five types of financial planners. You can find independent advisors, big bank advisors, commission-based advisors, fiduciary advisors, and several other varieties.
We don’t have room to break all these down here. If you’ve grown in wealth and want to dive deeper into this level of detail and really understand how to spot the best financial advisors, get our free eBook, The Ultimate Guide to Choosing the Best Financial Advisor for Investors with $3M – $70 Million Liquid Assets.
If your savings have grown up into the six figure range and your financial situation has become more complex, you’re probably in a place where seeking more personalized planning will help you gain more stability and long term growth, and help you navigate the choices you’ll be facing.
For instance, you may be pursuing some sizable financial goals, such as buying property, paying for your kids’ college, or starting a business.
A financial planner can help you succeed in reaching those goals and others like them.
Doing all this on your own will be increasingly time-consuming and fraught with risky decisions you’ll have to make without all the information you really need.
How much does a financial advisor cost?
But beware: Costs go much farther than the basic fee. The eBook mentioned above explores this issue in much greater depth, using specific numbers that reveal how much more you can end up paying if you go with the wrong financial planner.
For a glimpse into this expensive difference among advisors, here are 6 investment costs besides the basic fee that can drive your expenses through the roof.
When a financial advisor is not right for you:
It’s harder to answer for this type of financial planner, because so much variety exists. This is why we wrote the eBook, The Ultimate Guide for Choosing the Best Financial Advisor for Investors with $3M – $70 Million Liquid Assets.
Even if you don’t have that level of liquid assets yet, you will still find it extremely helpful.
For a simpler place to start, here are 10 questions to help you narrow down your search for the right financial planner.
To put it in the most basic terms, if you have more than $1 million in liquid assets, you will be better served by a wealth manager.
Ideal For: People with Low Savings Just Starting Out
If you’re young and have only a few thousand dollars saved up (or less), you won’t be able to afford a human financial planner. Even more, you simply don’t need one yet.
Robo-advisors charge much less than human ones, as you would expect.
You fill out a few forms with your information, and the robo-advisor sends you a series of recommended investment options for you to choose from. You’re the one making the final decision about what to do. The robo-advisor doesn’t do it for you. Robo-advisors are not AI. Not yet, at least. They just make recommendations that you may not have thought of or even known about without spending many hours of investigation.
That’s the primary benefit of a robo-advisor – the time you will save.
If you have lower savings and few complications in your finances, and don’t have time or interest to learn about the intricacies of investing, a robo-advisor gives you more knowledge than you have by yourself and doesn’t take too big a bite from your savings.
When a robo-advisor is not right for you:
As your financial situation develops, robo-advisors become increasingly inadequate.
If you need additional services such as estate planning or insurance help, a robo-advisor won’t be helpful. As you acquire real estate, gain multiple accounts, or increase in your net worth, you’ll quickly realize a robo-advisor isn’t up to the task of helping you in meaningful ways.
The simple rule is this: When you reach a point when you can afford a human financial advisor, you should get one.
5. Robo-Advisor Hybrids
Ideal For: People with Low Savings but Escalating Complications
Next up from the basic robo-advisor comes an option to speak to a real person when you have questions. This version affords you the same benefits of a robo-advisor, but with the ability to increase your understanding of what you’re doing, and why.
As your wealth increases but still remains in the five figure range, you’ll likely find yourself with more questions and the need to talk to someone about your finances. At this point, the hybrid robo-advisor makes the most sense.
When a robo-hybrid is not right for you:
Same as the non-hybrid version. Once your situation becomes too complex for the robo-advisor, then you need to shift to a real person. Just as before, once you can afford a human financial planner, it’s probably time to find one.
Which Financial Planner Is Right for You?
Hopefully this article narrowed down your options and helped you decide where to focus your search.
If a wealth manager appears to be your best option – if you have over $1 million in liquid assets – Pillar might be the perfect match for you.
There’s only one way to find out.
In this meeting you’ll receive what we call a Serenity Investment Portfolio plan and a fully customized wealth management blueprint. We’ll show you how this plan can withstand whatever market and economic forces come against it, in part because it gets monitored quarterly and can be easily adjusted.
You’ll also receive personalized strategies – catered to your unique situation, for tax minimization, estate planning, real estate, stock options, retirement, business mergers and acquisition, and other specialized services as appropriate.
Finally, we’ll walk you through some ‘what if’ scenarios that will help you make decisions about your financial future and test the strength of your portfolio.
By the end of the meeting, you’ll have a pretty good idea if Pillar is the right wealth manager for you. And if we’re not, you’ll still get the benefit of having learned so much in such a short time. You’ll never view investment planning the same way again.