Financial planners or advisors advise people on how to save, invest, and grow their money. They help people focus on a specific goal and help them achieve this goal; this can involve preparing the person for purchasing a house or how to get the most of their assets. While some financial advisors specialize in a particular financial area such as retirement, others advise on the range of financial areas. Financial planners or advisors are not stockbrokers or accountants who help lower tax bills, or they are not insurance agents who advise people with various insurance policies.
The most authentic advisors will have a CFP (a credential that expands Certified Financial Planner), which is extremely significant. This is because a CFP has been through a demanding test conducted by the Certified Financial Planner Board of Standards on finance and its specifics that qualifies the CPF to be one of the best financial advisors. In addition to this, in order to keep his job designation, a CFP needs to take courses on finance-related subjects and ethics continuously. Of course, only this does not ensure that he will be the best financial advisor. It is advisable to check the backgrounds of multiple financial advisors before you decide to settle on one.
Financial advisors, usually, earn hourly or flat rates for services rendered. They also earn through commissions which are fees paid to them whenever a client buys or sells stock or makes some other investment. However, a financial advisor who earns through commissions alone may not be the best person to turn to for consulting because he may have biased interests. Fortunately, there are a plenty of financial advisors who earn only through the fee a client pays them for services as opposed to taking a cut from life insurers or finance companies for selling their products to a client. You can pay such financial advisors a flat fee that might be approximately $1,500 for a sound financial plan. You can also pay them annually about 1 percent of the value of all the assets they are helping you out with. Or, you can pay them by the hour like you pay lawyers for services rendered.
Why do people need a financial advisor? The best financial advisors are well equipped to assist in saving, investing, and growing money for one. So, hiring a financial advisor is effective and time-saving. The money you will pay to a financial advisor is worth it as you will have a comfortable retirement, afford a college education for your child, or get to choose the right mortgage when necessary.
To find the best financial advisor, look for someone who is a CFP. While CPF is not a guarantee of credibility or efficiency, it assures of reliability. Also, get recommendations for the best financial advisors from your network. Hiring a financial advisor who has substantial experience also helps. The National Association of Personal Financial Advisors (NAPFA) has some of the popular and best financial advisors as its members who operate on a fee-only basis. This ensures that they do not direct your money towards any investment from which they get a commission. Another group of credible CFPs you can go for are from the Garrett Planning Network. The CFPs in this group devote a certain amount of time to smaller projects at an hourly rate. They can assist you if you need the best financial advisor, for example, to ask a few questions. You can pay by the hour and be done with it.
However, it is good to remember that not all fee-based financial advisors are the best as opposed to the ones that earn from commissions. For instance, if a fee-based financial advisor earns 1 percent of the value of your assets and if you need to dissolve your assets, the advisor might advise you against it because his fee is based on the value of your assets. If you don’t have plenty of assets, it is best to choose financial advisors who charge on an hourly basis. CFPs that charge on an hourly basis are just starting out on their jobs and will probably be more meticulous with their work given that they have to establish a credible reputation.
It will be beneficial to choose a fiduciary, one who has pledged to act in the best interests of his client. If you find financial advisors who are not fiduciaries, they may suggest plans that are suitable for you, but these may not be the best for you. Ensure you do a background check on a financial advisor before you choose one. Ensure the credentials of the financial advisor is valid and updated.
