Posted on June 8, 2017 in ,

The Value of a Financial Advisor

Achieving financial independence can seem like a daunting goal for many investors. In a world of economic uncertainty, changing interest rates, political turmoil, and market volatility, high quality advice from a skilled financial advisor can be the difference between financial security and just getting by. Finding a quality advisor can prove to be a major challenge in itself. In the intricate world of finance an investor can run into many challenges. Interest rates, high valuations in the stock market and money management can all be perplexing, which is why a financial advisor’s guidance can be a valuable asset. But how do you find a quality advisor?

To start off, a recent study actually affirmed the on-going value of a quality advisor in five key areas. Selecting investments, financial planning, tax planning, portfolio balancing and helping clients avoid behavioral mistakes are all important to an investor. Some advisors could be more suited in certain areas than others, but overall they oversee challenges and add value to your wealth.

Use of the title “financial advisor” is not regulated. As a result, anyone can call themselves a “financial advisor” even if they don’t have specific skills, education, or experience. When choosing a financial advisor, it is important to look at the education and credentials before making a decision. Two of the highest financial planning credentials available are Certified Public Accountant / Personal Financial Specialist (CPA/PFS), and CERTIFIED FINANCIAL PLANNER™.

It is also important to know whether your financial advisor is a fiduciary. Advisors who are fiduciaries operate under a higher standard than non-fiduciary advisors. By law, a fiduciary must put your best interest first when making recommendations or giving advice. Non-fiduciary advisors like insurance agents and stockbrokers are not held to this standard and are allowed to recommend products that make the salesperson the most money even if it isn’t the best product for you. Non-fiduciaries often make their living on sales commissions, while fiduciary advisors charge specific fees for the services they provide. These fees can be charged hourly, as a flat rate or as a percentage of assets managed. When you use a fiduciary advisor, you will know up front exactly what advice will cost you.

Products sold by non-fiduciary advisors often have internal expenses and fees that are much higher than investment alternatives a fiduciary might offer. High fees and expenses ultimately reduce investment returns, and make it harder to achieve financial independence. Be sure to ask questions and understand exactly what type of advisor you are dealing with before you make a commitment.