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A financial advisor (or adviser) is a trained specialist who helps people with their investments and financial planning. This can mean anything from retirement planning to brokerage advice to tax arrangement. He or she can either work on commission or charge a per-transaction fee every time he or she works with a client. The name of this position is sometimes used interchangeably with the word "broker," but while both professionals offer financial advice, a broker often deals only with investments, while an advisor can also offer guidance on savings, creating a budget, and dealing with debt.
The main reason people hire a financial advisor is to help with retirement planning. In this case, he or she can help with forecasting future economic trends, deciding how and where to invest, calculating tax liabilities, and budgeting. This professional can also suggest the best way to use a 401(k)/401(k) Roth account and how stocks and mutual funds are best distributed.
In the United States of America, a financial advisor needs to be licensed to provide advice on securities investments, but need no specific education for anything else. A certified financial planner (CFP®), on the other hand, must meet certain education requirements, plus pay a yearly recertification fee. The certification allows professionals to deal with the client's financial status, and estate and insurance planning.
Choosing a financial advisor can be difficult, and it is important that investors take their time when doing so. Potential clients should choose somebody they can trust and form a lasting relationship with. On the first meeting, they should ask questions about fees and services, and make sure they know what they will be getting for their money. Clients should ask how long the advisor has been in business and what kind of people he or she usually works with. Someone who works mostly with small business may not have enough practical experience to give advice on personal investment.
A good professional financial advisor will work based on the client's financial goals and will take into consideration your comfort level when it comes to investment risks. He or she will also suggest appropriate steps to get his or her client working on the right direction.
Subway11-I agree with you. For example, many advisors try to sell universal whole life insurance that offers a cash value and stray you away from term life insurance.
The reason is simple. Financial advisors earn high commissions on whole life policies and the investor pays significantly higher fees as well.
For example, a whole life policy that offers $300,000 of coverage might cost an investor about $400 to $500 a month.
However, a term policy with no cash value for the same level of coverage for a period of 20 years charges only $45-60 dollars per month.
While the term policy offers no cash value the difference in what you pay for whole life insurance policy
and what you save with the term policy if put in the stock markets earns a much higher reward than any cash value offered in this type of insurance product.
This is just one example of why it is best to seek a fee-based advisor that has no financial gain in the products he or she is selling. Investors should avoid situations that yield a high conflict of interest.
I agree that finding the right financial advisor is challenging, but I think it is best to start with a fee-based financial advisor.
These advisors get paid by the hour and do not receive commission on any of the products the advisor recommends. This makes the financial advisor more impartial and more likely to give you sound financial advice rather than sell you products that you don’t need.
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