Financial Advisory Services

couple with financial advisor

What is a Financial Adviser?

Before anyone starts hunting around for the best financial adviser they can find, it’s important to understand just what a financial adviser does and who should take advantage of their services. A financial adviser is a certified professional who helps people manage their finances. In other words, an adviser helps you plan how to meet your financial goals in addition to guiding your progress along the way. The term adviser encompasses any type of investment manager or financial planner; it can also refer to digital investment platforms, often called robo-advisers.  

Financial advisers help people deal with some of the more difficult matters surrounding personal finances such as finding the right life insurance policy or retirement plans or putting money aside for college educations. In addition to investments, a certified financial planner has expertise regarding things that can affect your finances such as insurance and taxes.

What Does a Financial Adviser Do?

Usually, a financial adviser will start by looking at your current financial situation to get an overall picture of your debts, your assets and your regular expenses and will pinpoint areas for improvement.

An experienced financial adviser will ask about your long-term financial goals and start to put together a plan to meet them. In addition to helping you save for retirement, an advisor may help with debt service, refinancing or purchasing real estate. They also help with by steering you to specific investments in stocks or bonds or other vehicles or by managing your entire portfolio.

Types of Financial Advisers

There are different types of financial advisers that accommodate different clients based on the types of services that are important to them and how much hands-on guidance they need. Below is a list of the basic types of advisers, and the services they provide.

1. Traditional, Hands-on Adviser

This type of adviser fulfills the traditional role of providing personal guidance and planning and meeting with clients periodically to update them on the status of their portfolio. He or she may perform slightly different roles due to the various designations they have.

  • Registered investment adviser: for a fee, this person or firm gives advice and makes financial recommendations regarding buying and selling securities. An RIA is regulated by the Securities and Exchange Commission or the state in which the RIA is registered.

    One of the things that separates RIAs from other financial professionals is that they have a fiduciary duty to put their clients’ interests above their own. In other words, they are held to a much higher standard than what, for example, stockbrokers are held to on taxable accounts.  Effectively, it is the highest standard of care in the legal system.

    While some RIAs still directly invest clients’ money, many now devise a strategy for asset allocation for their clients and will outsource the actual asset management decisions to another party.

    Generally, RIAs work on a fee-only basis. Because you pay them directly for the work they do, they aren’t supposed to earn commissions from companies by selling you their financial products. A fee-only RIA usually charges a fee as a percentage of the assets under management or an hourly rate for consultation work.
  • Certified Financial Planner: to use the designation CFP, an adviser must complete a course of study, pass a comprehensive exam and have a minimum of three years work experience in financial planning. As a result, this individual can assist with different areas from creating financial goals to budgeting for retirement to dealing with an inheritance. Some financial planners are also licensed insurance agents, so they can assist with any life, health, property or casualty insurance needs.
  • Stockbroker: a broker buys and sells securities for their clients in exchange for a fee or a commission or sometimes both. Similar to a CFP, a broker must also pass exams and register with the Securities and Exchange Commission. They do not necessarily, however, provide the same kind of advice as a CFP or an RIA.
  • Wealth managers: these professionals typically manage the portfolios of high net worth individuals.

People often turn to hands-on financial advisers when they are making changes in their life or their finances have become too complex for other methods. By meeting in person, an adviser can have an in-depth conversation about your long-term goals, your risk tolerance for investing and what you want your retirement to look like. In short, the advantage of a personal adviser is that they will tailor a plan specific to your needs and goals and will adapt that plan as your life and goals change in the future.

2. Online Financial Planning

Online financial planning combines the personal touch of a traditional adviser with the more cost-friendly model of a robo-adviser. This type of service works great for people who want to speak with an adviser but don’t mind communicating through online chat or video. By meeting virtually, you can save money while still receiving the benefit of a personalized financial plan.

One of the advantages of online financial services is that you can select the kind of advice you want. One of the most popular online investment companies, Betterment, charges a fee for basic investment management. If you want email or phone access to their team of financial planners, you can pay more for a premium plan.

If you need more help and would like a personalized phone session with a financial adviser, you can purchase one of Betterment’s financial advice packages, which are geared toward specific life events such as marriage or college planning or retirement.

Other online services charge a flat fee tied into the complexity of the advice you require, which also includes investment management. In many ways, these businesses are hybrids of the robo-adviser model because they use computer algorithms to manage your investments while giving you access to advisers who can answer specific questions. Consequently, this model suits many people because it combines low costs with personalized service.

3. Robo-advisers

Typically the most cost-friendly option, robo-advisers offer digital financial advice based on computer algorithms, which put together and manage an investment portfolio for you. They’re a great solution for people who need to start planning for retirement but have no idea where to begin. 

For example, people who have money to invest but don’t have time to research the stock market can benefit from the ease of use of a robo-adviser. Furthermore, robo-advisers are great for the entry level investor without a large nest egg because they usually have low or even no-account minimums.

What are the Fees and Commissions for Financial Services?

Financial advisors charge for their services in different ways. Some charge by the hour and others make commissions from the investment products you purchase through them. In some cases, advisors do both.

Nevertheless, many advisors charge a fee as a percentage of your invested assets. A common industry benchmark is one percent, although it can vary. In addition, some advisors earn fees not from clients but from banks and investment companies. Robo-advisers, on the other hand, usually charge less than traditional advisors; their fees typically range from .25-.50% of assets under management

It is critical, however, to your long-term financial security to keep an eye on these fees. For example, if your portfolio shows gains of 4% for the year but your advisor charges 1%, then your return is only 3%. Furthermore, your bottom line will also be affected by whether your advisor charges on all assets under management or just the assets he actively manages.

For instance, an adviser who charges .75% on everything could cost you more than someone who charges 1% on the half of your assets that he actively manages.

Also, some advisers put their clients into funds that charge their own commissions. In this instance, you could wind up paying a commission to both a fund and your adviser at the same time. For this reason, a financial professional should be as transparent as possible with his fee structure and commissions because these costs can really chip away at your returns over the long run. A champion of low-cost investing, Warren Buffett, stresses that, “you don’t get better because you charge a lot.”

Do You Need a Fiduciary?

When you hire a financial adviser, it is important to establish that they have a fiduciary duty to you. A fiduciary is held to a higher standard than a nonfiduciary. In other words, a fiduciary financial adviser has an obligation to put your needs above his/her own and act in your best interest, which includes giving unbiased advice. 

For example, they aren’t supposed to receive commissions from companies by getting you to invest in their financial vehicles.  In essence, a fiduciary duty is a guarantee that an adviser will not get you into investments that are profitable for them but not the best fit for you.

Can You Manage Your Money Yourself?

The simple answer is yes, you can. The better question is – is taking care of your own money a good idea? This answer is a bit more complicated, but it always depends on your circumstances and your goals.

To begin with, managing your money means doing things like comparing ROTH IRA providers and staying current on lots of information after you open your account. For instance, there could be tax changes that will affect your retirement planning or changes in the amount of money you can contribute to a retirement account. Furthermore, it will be up to you to develop a sensible long-term plan for paying off your house, funding college educations, and estate planning. While this is possible to do by yourself, it definitely takes time.  The main thing is to determine if you’re willing to put in the time to handle your finances effectively.

Although it’s normal to have more than one investment account, outside investment management can make things simpler by consolidating your finances in one place, thereby making it easier to devise a coherent long-term plan.

Especially if you’re not confident about making financial decisions, it really helps to get a second opinion on things like rebalancing assets or legacy planning or whether you have adequate life insurance. Only you can decide when the time is right to seek outside assistance.  If you do have questions, however, it is better to seek help sooner rather than later.

You Should Feel Comfortable With Your Financial Planner

When all is said and done, the decision to hire a financial professional remains a personal one. You need to be comfortable with this person because they will be privy to all of your financial dealings. Therefore, do not hesitate to ask as many questions as it takes to get to know how he or she deals with clients. Trust is of the utmost importance here since this individual will play a large part in your financial future.

The good news is that a knowledgeable financial adviser such as John Savadjian can look at your financial options objectively to find solutions that are right for you. The bad news is that the risks are all yours in this relationship since the adviser has nothing to lose. Consequently, you need to be completely honest about your needs and your goals in order to find the kind of financial help you require to meet those goals.

Financial Advice During Covid-19

With millions of Americans losing their jobs due to the coronavirus pandemic, many investors are wondering how to protect their investments. The key, as always, is not to panic but to adjust your financial plans to keep this short-term public health crisis from becoming a long-term financial disaster. Indeed, this is the perfect time to reexamine your portfolio with your financial adviser to plan how to endure this hardship and emerge successfully on the other side.