Wise Investment Begins with the Right Financial Advisor!
Wise Investment Begins with the Right Financial Advisor
Who IS a Financial Advisor?
When it comes to achieving your financial goals, where do you find competent advice?
When seeking a professional, the consumer will find a wide range of educational backgrounds in the field of money. Stockbrokers, accountants, lenders, and insurance agents are all called “financial advisors.” How can you tell them apart? One should not rely on a title alone but must learn the questions to ask a prospective broker or advisor.
Are they appropriate for you?
Keep in mind that you are hiring them to help you. Interview them for the job! Ask them to specifically explain their role with you, what they do, how they get paid and all of the costs you incur. What alternatives are available to you in working with them or with other resources? Who is actually managing your investments and what selection do they have available? Are you paying layers of costs for layers of management and can you select something with lower expenses? Are they a fiduciary, bound to make recommendations in your best interest? Ultimately, you want information and advice that is competent and relevant to you, and it is empowering to know the variety of relationships from which you may select.
Stockbrokers are required to pass rigorous tests and register with the Securities Exchange Commission (called the FINRA Series 7, or Series 6 if selling only mutual funds or variable annuities). They work for a brokerage firm, mutual fund company, bank, insurance company and they sell you products and services of that company. They hope their products and services can help you, but they have sales requirements to meet to satisfy the boss they answer to — not you.
What Fees are Involved?
Brokers have traditionally been paid by commission on purchases and sales, “no trade, no pay.” Some products may pay a higher commission than others, and unlike insurance, where you don’t directly see the commission money missing from your account balance, the investment commission is deducted directly from your investment, but you may not find out how much that is until after the fact— unless you ask first.
Range of Investment Products Available
Are you working with a sales person providing you financial products from what they have to offer (which may be limited) or with a professional advisor who has years of experience with a wide range of products to consider? Who is their boss when it comes to professional financial advice to invest your money, you or their sales manager?
What you may not know is there are independent financial advisors who work as consultants, whom you hire to work for you — you are the boss. It takes more work to locate and identify these registered independent investment advisors whose marketing budget is dwarfed by the advertising power of the larger regional and national brands.
What Experience Do They Have?
An experienced independent advisor knows how various financial companies operate, generally has lower overhead and gives clean advice with disclosure of costs and alternatives available to you. They work in a fiduciary capacity, advising you, their client, in your best interest. You are the boss. They are free to select from a broad array of investment products, not just the in-house solution. Many registered independent advisors work on a fee basis, earning no commission, but rather a percentage of assets under management where they earn more if your investment balance grows. Their own income is directly affected by the advice they give. Some offer both or an hourly rate.
Lastly, when selecting a financial advisor, learn their career background in the financial arena, their relevant education and years of experience. Some financial advisors have guided people through market downturns and some have only experienced upward markets in their career. Guidance from someone who has stayed in the business through good times and bad can give level-headed and helpful advice because they’ve made it through tough times, whereas many did not, or have only started in the job during the recent 7 year upward markets.
Be a savvy consumer, ask questions. In deciding to trust in investment advice, you can now make better informed decisions. Enjoy the confidence and comfort of working with a financial advisor who has made a sustainable choice in serving people who like to pay for quality, competent help with rates that are a good deal for what you need.
by: Cheryl Seifert, CFP®
Cheryl Seifert, CFP® has helped investors for over 20 years. Starting as a stockbroker in 1992, she achieved the Certified Financial PlannerTM designation in 2011 and since 2015, as an independent financial advisor with Capital Financial Consultants Group, brings metropolitan wealth management skills to rural clients. She loves working together with investors, empowering them through financial education to create investment strategies that are aligned with their goals.