A financial adviser offers clients assistance or recommendations when it comes to money matters. They help you devise a customised plan to reach your goals after evaluating your financial situation and learning your objectives.
Estate planning, tax preparation, and investment advice are among the services provided by financial advisers, who are increasingly seen as a “one-stop shop” that offers everything from insurance products to portfolio management.
A financial adviser must genuinely offer direction and assistance. This distinguishes them from, say, a tax accountant, who files returns without offering advice on how to optimise tax benefits.
Some so-called “financial advisers” might actually just be product sales people, so do your due diligence on reputable individuals or companies who offer genuine advisory services.
What services do you need?
You should start by identifying the financial areas you require assistance with. These might include recommendations for insurance products, debt payback, retirement planning, or estate preparation.
Others might want to set up trust funds for their children, or resolve challenging taxation issues. Determine your needs and use this to drive your search for the most suitable finance professional for you.
Types of financial advisers
1. Licensed financial planners
To construct long-term wealth-management strategies, licensed financial planners consider every aspect of their clients’ financial lives. They may work with specific types of clientele such as professionals or business owners.
2. Investment advisers
Market experts can help you establish an investing strategy based on your financial objectives.
3. Stockbrokers
Bonds and stocks are purchased by stockbrokers on behalf of their clients. These professionals can execute trades for both individual and institutional investors, and are typically connected to a brokerage firm.
4. Robo advisers
Robo advisors are online investment-management services that provide individualised recommendations using algorithms and information about your financial goals.
Numerous advisers employ a hybrid approach that mixes one-on-one time with automated products. But experts forewarn that robo advisors cannot take a personalised approach to risk management as a human would.
5. Estate planners
These financial experts assist with organising your documents, such as a will or revocable living trust, in the event of an untoward incident such as major disability or death.
A healthcare proxy and executor are two examples of people who can make choices for you in the event you are unable to.
How much do you pay?
Financial consultants used to collect fees based on a percentage of the assets they managed for you. Today’s advisers provide a wide range of pricing arrangements, making their services available to customers with different levels of payment resources.
Those who are fee-only or fee-based can base their payment structure on the overall value of the assets you have entrusted to them. Alternatively they might bill by the hour, by the plan, through a retainer agreement, or through a subscription model.
How often should you meet?
The frequency of meetings with your adviser should be decided upon at the outset of your working relationship. Questions to consider include:
- how frequently should you meet in the first year to get to know each other and build your strategy, and how often thereafter?
- should you hold a meeting in your office, in your adviser’s office, or over a conference call?
- how often should you receive investment performance reports?
You might want to meet more frequently if there are numerous events – such as retirement, business sales, or divorce – that necessitate this. Some might only need to consult their adviser twice a year, or even annually.
A trustworthy financial adviser will be able to advise and ensure you are aware of when you should next be in contact.
This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.