Hiring a financial advisor can be the beginning of a great financial future. Advisors are well versed in the best financial practices and planning and meeting financial goals. Whether you’re managing wealth, a large portfolio, or simply saving for a large purchase or retirement, a financial advisor can make the process much more focused and less stressful. Keep reading to learn more about the function of financial advisors and how they can benefit you.
Robotic or Human?
With financial advisors, you generally have two choices: a robo-advisor or a human one. The robo-advisor has its drawbacks, besides the obvious fact that you can’t exactly have a conversation with it. However, robo-advisors can be cost-effective alternatives to the traditional advisor.
A robo-advisor is just a digital service that helps manage your portfolio according to the goals you define. Some firms even offer hybrid packages, so you’ll be able to discuss finances with a human when the need arises.
Certified Financial Planners
One variation of the “financial advisor” category is a certified financial planner. These individuals will provide sound advice on how to better manage finances, curb spending, and increase profits. These are educated professionals that are required to complete a certain level of training before becoming certified.
Wealth Managers
These individuals usually work with clients that have a very high net worth, assisting them with managing their fortunes and making good financial choices. Normally, wealth managers will be very picky about the clients they serve, as their payment is linked to a percentage of the wealth they’re managing.
Brokers
Brokers act as a sort of middle-man for clients and financial products. Your broker will purchase financial products on your behalf, and charge a fee to do so. Stockbrokers, insurance brokers, and more are included in this group. Brokers are generally good for those managing large portfolios or just getting started with investing.
Which One Is Right for Me?
Choosing the right financial advisor depends entirely on what you need for your financial situation. A large stock portfolio will likely require different services than, let’s say, a goal to save x amount of money for retirement.
This part of the process is where it’s important to choose between a robo-advisor and a human one. With a complex financial situation or goal, you’ll likely want a human to speak with. Ironing out details and goals is significantly more effective when you can converse with another person.
Fee Structures
Fees will differ across different firms and individual advisors. Usually, a robo-advisor is the cheapest route, incurring a cost of somewhere between 0.25% and 0.50% of the assets under management. This is more cost-effective than their human counterparts, though again, you cannot interact with or discuss goals with a robo-advisor.
Human advisors may charge on an hourly, retainer, flat fee, or percentage basis, or any combination thereof; it simply depends on the advisor. Be sure you discuss the price with your advisor before agreeing to their services to avoid any unforeseen costs ahead of time.
Some advisors won’t touch accounts with a net worth of less than $100,000 or more, so you’ll want to be sure the advisor you want to work with is willing to manage your account. Go here to compare the best financial advisors in Los Angeles.
Ask These Questions First
Before deciding on a financial advisor, you’ll want to ask your prospects a few questions to be sure they’re the right fit for you.
What Will My Overall Costs Be?
Not only are you being charged for the advisor’s services, but there are fees and other payments associated with any kind of investment. You’ll want to be sure to calculate these before pursuing any financial plan so you can get a good estimate of what the entire cost will be.
What’s Your Availability?
This is a vital question, as you’ll need to know when you can get ahold of your advisor should any questions or concerns arise. Playing phone or email tag for days can quickly become frustrating, so be sure you know when your advisor is available for contact or meetings.
What Are Your Qualifications?
You obviously don’t want just anyone handling your money, or managing very large funds or investments. Asking for your advisor’s qualifications ensures that you’re getting the best service possible from a highly-qualified individual. You can also inquire about some of their former or current clients to get a better idea of how the advisor performs.
Don’t Be Afraid to Make Frequent Follow-ups
Letting a financial advisor handle your finances doesn’t mean you hand over the reins and let them take over. The relationship should be more akin to a partnership, with information shared easily and confidentially, as well as updates on how your investments are performing.
If your advisor does not take the time to return your calls or emails or set up meetings every few months to discuss your portfolio’s performance, it may be a good idea to look elsewhere for an advisor. You don’t want your money managed by someone who doesn’t communicate.
Conclusion
Remember that advisors come in different varieties (not all of which are human). Choosing the best advisor for your particular financial situation involves many factors, including an understanding of what you actually need out of an advisor, and how much the advisor will cost in the long run. Choose wisely and always ask for the advisor’s credentials.
