If you're looking to get your financial life on track and have long-term goals, working with a financial planner is an excellent idea. A good financial planner can help you save money and focus on your goals.
Not all financial planners are the same. It is a common misconception that all financial planners offer the same services: help with investment decisions and unbiased professional advice. This is not always true and it could cost you. It's important to choose an experienced and trusted financial planner - a fiduciary.
Get to Know the Various Types of Financial Advisors
Anyone can identify themselves as a financial advisor as the term is not a regulated title – like doctor and lawyer. So, you must take care to select a trustworthy financial advisor.
Consider how the personal financial planner gets paid. This can have an impact on the financial advice you receive - and whether it's in your financial best interests.
How financial planners are paid:
- Commission: the advisor earns money from the financial products they sell, like investments or insurance policies.
- Fee-Based or fee plus commission: the advisor charges the client for advice and makes an additional commission by selling products.
- Fee-Only: the advisor is compensated by a set fee, or on the percentage of assets. They do not make any money from commissions, incentives, or added management costs. So you know their advice is in your best interests.
Some financial advisors are bound by fiduciary duty - Fiduciary Financial Planners - meaning they are legally required to work in your best interest. The only type of financial planner required by law to always put your economic interests ahead of their own is a fiduciary financial planner. Other financial advisors only need to suggest products that may fit you, regardless of price or how much commission they make.
The Benefits of a Fiduciary Fee-Only Financial Planner
Fee-only financial planners are fiduciaries. With this type of planner, you can be confident you're getting financial advice that will help you succeed.
Financial planners who are fiduciaries have had more training and experience than other financial planners. They are certified and must stay current with all economic changes by continuing their education. Additionally, they sign an ethics agreement periodically to keep their fiduciary status active.
Fiduciary fee-only financial planners are both legally required to work in your best interest and their services are unbiased - no other type of financial advisor can say the same. Fee-only financial planners adhere to the highest ethical standards. They have a responsibility to keep information confidential and present their clients with comprehensive, honest advice so that you can make well-informed decisions. A fee-only plan is transparent and objective.
In contrast, financial advisors who earn commission from selling you financial products may not always have your best interests in mind. Advisors who do not charge fees for their services may get all or part of their income from commissions, which can present a conflict of interest. Commission-only advisors are also not fiduciaries. They are effectively brokers for investments and insurances and are only held to 'suitability' standards. They are not required nor obligated to have your best interests in mind. Some fee-based financial advisors are fiduciaries, but you should make sure they always act as fiduciaries before discussing certain types of products with them, like insurance.
6 Reasons to Choose a Fee-Only Financial Planner:
- They focus on the client's needs without any conflict of interest, since they do not earn commissions or other incentives.
- Are more affordable because they can set your fees based on the time spent and what services you need. This way, you only pay for what you need. Sometimes these advisors also charge flat fees for specific services.
- Provide you with more personalized service since there is no pressure to sell you products that may not be the best fit for your current situation.
- Give advice and support in every area of personal finance, whether you are looking to plan for retirement or need help with your taxes.
- Have no hidden costs or never-ending sales pitches. You deserve to know what you are paying upfront without any catches!
- Offer continuous advice and planning, rather than simply selling a product. This makes them ideal for long-term wealth building and managing major life changes.
How a Fiduciary Fee-Only Financial Planner Can Help You
Financial advisors are more than just money management resources. They can help you plan for your financial future and protect yourself against life's uncertainties. This includes managing investments for retirement.
Fee-only advisors can help you with the big picture of your finances. They will help you to develop a game plan for success based on what financial goals are important to you, how much risk you're comfortable taking on, and how soon you need or want results.
When it comes to your finances, it is important to have an advisor you can trust. With a fiduciary fee-only financial planner you will have someone to manage your money while avoiding any conflicts of interest. By working with a fiduciary fee-only financial planner, you can be positive that you will receive the most updated financial information and guidance. If you are looking for an independent, unbiased, qualified financial advisor who will make your interests their top priority, then choosing a fee-only financial planner is the smart choice.