The Role of a Financial Advisor and How to Choose One

In my webinars and articles, I constantly recommend that you speak to a Financial Advisor. I have been a registered advisor for more than 22 years and have never had a client who didn’t benefit from my services.

I’m always surprised how many people think you need a lot of money to work with an advisor. That is not true. Even if you don’t have a lot of money, an advisor can help you manage your money in ways that you never thought possible. 

We all have needs, hopes, and dreams. If we just think of them and try to keep them in our thoughts, they all remain dreams. When you put things into writing, and your goals are aligned with your timeframe, you know a dollar amount associated with those dreams or goals.

The hard part is finding the road map to reach those goals, which is also largely based on your investment risk tolerance.

That is where a financial advisor comes in. They look at your entire financial picture and ask hard, pertinent questions about your dreams, needs, and financial situation.

They will uncover your strengths and weaknesses and create the roadmap to help you overcome those weaknesses and help you achieve your short and long-term goals. 

To learn more, read on or watch my webinar on this topic below.

What is a Financial Advisor? 

The term Financial Advisor covers many different positions. However, for our purposes, it’s meant to include fiduciary, registered, licensed representatives, and more credentialed Certified Financial Advisors. They may have many initials after their names as well.

As with any professional handling your more personal information, you should always do your due diligence, interview prospective advisors, and research their employment history (using a site like Broker Check.) You need to work with someone whose investment philosophy aligns with your own and who, as a fiduciary, always puts your best interest above their own. 

Research suggests that the benefits of working with an advisor include less stress. You don’t have to go it alone. And you don’t have to toss a coin to make financial decisions, wishing for the best outcome. Working with an advisor could help you accrue 15% more money to spend in retirement.

Here is a staggering statistic. The average age of widowhood in the U.S. is 59. That's an age before Social Security starts, and for those on the younger spectrum of the average, long before access to retirement funds is available.

For those of us who find ourselves leaving the workforce early to care for a loved one, it hurts the ability to continue saving for retirement. Add in the ever-increasing cost of healthcare in treatment and insurance and the inflation of goods and services, and you can see where this is heading.

The need to properly manage all aspects of your financial life is now apparent. There is no redo; you need to have all your ducks in a row to be financially solvent for the rest of your lives. 

Types of Financial Advisors

Robo Advisors: These are digital services offering simplified, low-cost investment management. You answer questions online, and an algorithm will build you an investment portfolio. There are usually no account minimums and you do not meet with a live person.

Online financial planning services and advisors: These online financial planning services are more costly than Robo advisors, but you can speak with a live person. Many can also create a holistic financial plan. Additionally, you can be assigned to meet with a credentialed Certified Financial Advisor. They will vet the advisor for you. Unfortunately, you won't be able to meet in person. They may or may not have account minimums. They may be paid by commission and through planning fees.

Traditional financial advisors: These advisors can meet with you in person. They have more personalized services and can help with all of your financial needs. They have a variety of fee structures. They are the most costly to hire but offer specialized services and what is needed for complex situations. They generally also require a higher minimum balance to manage. They may or may not be fee-based. Advisors manage assets and offer comprehensive financial planning. Many of these advisors also have advanced credentials, such as a Certified Financial Planner (CFP) designation.

How Do You Find a Financial Advisor? 

First, you must ask yourself, “What type of help am I looking for?” and then find the advisor who best meets your needs.

Some of the topics of financial planning include:

• Taxes
• Retirement Planning
• Risk Planning
• Education/College Planning
• Asset Management
• Budgeting
• Estate Planning

A good financial advisor offers emotional support and perspective during volatile economic times.

Just so you know, complete planning always considers your needs, goals, risk tolerance, time frame, and best interests before making recommendations. Ensure the financial advisor you choose offers the services you want in your financial and non-financial lives.

Ask friends or colleagues if they use one and how happy they are with their services.

CAUTION: Remember Bernie Madoff? He swindled friends and family with promises of high returns. So don’t just rely on your friends; you are responsible for your advisor selection. If something like high returns sounds too good to be true, run! Here are a few helpful websites to assist you in your search.  

• NAPFA National Association of Personal Financial Advisors 
• Garrett Planning Network
• XY Planning Network
• ACP Alliance of Comprehensive Planners 

Here are some questions to ask your prospective financial advisor:

1. Are you a fiduciary?
2. How do you charge for your services
3. What are my all-in costs?
4. What are your qualifications?
5. How will we be communicating?
6. What is your investment philosophy?
7. What assets will you use?
8. What investment benchmarks do you use?
9. Who is your custodian?
10. How will your investment affect your taxes?

The advisor you choose should be willing to work with your other advisors, such as an estate attorney, CPA, and insurance professional. This is very much a team effort.

I often hammer the needs and benefits of working with a financial advisor because they are invaluable. Most will offer you a free meeting to get an idea of your needs and see if they can assist you with those needs. The questions I mentioned earlier are for this initial meeting. Remember, the primary purpose of a Financial Advisor is to professionally manage your financial life and get and keep you on track so that you reach your financial goals. They take on the worry so you can live your best life.

Want More Financial Resources? 

Diahanna is the Financial Program Manager at the HealthTree Foundation. She is also a HealthTree Coach who can help you with financial concerns, questions, or locating financial resources. HealthTree Coaches are volunteer AML patients or caregivers willing to share their personal experience and knowledge of resources with others. 

FIND OR BECOME A HEALTHTREE COACH TODAY