When do You Need a Financial Advisor or Planner?
Are all of your friends way ahead of you on the retirement plan? If you are hesitating because you don’t know where to begin, it’s time to figure out how to find the right financial advisor or planner for you. This choice is a crucial decision, since it can alter your financial future substantially. Here are some tips to help you find the best financial advisor for your needs:
Recognize and Understand Your Needs and Goals
Mathew McConaughey, in a great 5 minute YouTube video told us the first step in hitting your life goals is to know yourself. Don’t worry if this stops you dead in your tracks, lots of people don’t know who they are or what they want. Take some time to figure out what defines your personal financial goals are. What others think doesn’t matter in this thought process. This is about what you want out of life and out of retirement. What are your priorities? Is it Family? Faith? Money? Travel? Making a difference in the world? Whatever the goals are, is fine. Just recognize them.
The Path to Meeting Financial Goals
Before you find the right financial advisor for your future, be clear about your financial objectives, whether it’s retirement planning, investment management, debt reduction, tax planning, or a combination of these. Understanding your financial needs will help you find an advisor or planner specializing in the areas you require assistance with.
Credentials and Qualifications
Make sure when you look for a financial professional that they have the relevant credentials to your needs. Advisors should be a Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or Certified Public Accountant (CPA). These designations indicate that the advisor has received specialized training and adheres to ethical standards. Common credentials for a financial planner include a degree or industry experience, a CFP (certified financial planner), CFA (chartered financial analyst), and ChFC (chartered financial consultant).
This is a good time to stop and review the difference between a financial planner and a financial advisor. Both financial planners and financial advisors provide financial services, but they differ in their approach and the types of services they offer:
How Financial Planners Differ From Financial Advisors
Financial planners take more of a big picture approach to their client’s finances. They look at all the aspects, interests, needs and long-term goals. They help clients with long term plans to address those multiple aspects and goals, and regularly update the plans over time to keep clients on the path that best suits their changing desires, goals and needs.
Service Differences Between Financial Advisors and Financial Planners
Financial advisors are known to be more focused on specific transactions and short-term situations, such as managing investments. When clients have short term concerns or need specific investment or transactional assistance, a financial advisor may be the right solution. Some financial advisors may also take on a more comprehensive role, similar to a financial planner.
Education requirements for Each
Financial planners often have a bachelor’s degree and must have a Certified Financial Planner (CFP) certification. They also adhere to the CFP board’s four E’s (education, examination, experience, and ethics). Financial advisors may also need a bachelor’s degree, but they only need certifications for specific roles and responsibilities.
Experience
Financial planners often gain experience through an apprenticeship or by shadowing a certified financial planner. Financial advisors typically work under the supervision of an experienced financial professional for at least one year.
Generally speaking, financial planners develop long-term, strategic plans that address various aspects of client’s lives and update the plan on a regular basis over the years. Financial advisors tend to focus on specific transactions and short-term situations.
Communication and Accessibility
Regardless of whether you want an advisor or planner, make sure you can work with someone who communicates clearly and is accessible when you have questions or concerns about your financial plan.
Check the Fee Structure
Understand how the financial advisor charges for their services. Some advisors charge a percentage of your assets under management, while others charge a flat fee or an hourly rate. Look for an advisor or planner who is transparent about their process, fees, and potential conflicts of interest. Avoid advisors who earn commissions on financial products they sell, as this may create conflicts of interest.
Remember, finding the right financial advisor or financial planner is a personal process, based on your current and future needs. Choose someone you trust and feel comfortable working with. Take your time, do your research, and make an informed decision that aligns with your financial goals. Contact us if you have any questions on this or other financial planning related information.