So You Need a Financial Advisor...Now What?

October 09, 2015

Connect Member

Founder and CEO of GoldBean: Investing for Beginners.

The world of financial advice is a vast and complex one, and it can be hard to know where to start when you decide you want some help. For as long as there has been money in the world, there have been people around who charge a fee to hold it for you, or tell you how to manage or budget it.

If you have a complicated financial life — one with property, children, different assets, some debts, investments, and even perhaps a business — an advisor may be just the thing you need to bring order to your finances.

The first thing you should do is consider your goals. What problems are you looking to solve? Is it to save time dealing with a variety of financial issues? Is it to grow your nest egg? Is it to help you budget and save?

Once you come to terms with your goals, you’ll then narrow down the different types of advisors that are right for you. Remember, an investment advisor is not necessarily a financial planner. The difference is that an investment advisor is focused on growing your assets, and a financial planner is focused on the spectrum of your financial life — from insurance to trusts to budgets. If it’s the latter you want, look for someone with a high certification level, such as a CFP (Certified Financial Planner) in the United States. Also keep in mind that an advisor is neither an accountant nor a lawyer, so you may also need these people in your life as well.

One extremely important thing you should do, when anyone presents themselves as an advisor to you, is to ask what credentials they have. The main thing to find out is if they are bound by fiduciary duty to you. This means they must act in your best interest, rather than theirs. You know those people who try to get you to buy “higher interest” CDs when you go to the bank? They have no fiduciary duty to you. Their goal is to get your money out of your savings account and have it committed to the bank for a fixed term. The question, “Are you a fiduciary?” very quickly separates the advisors from the salespeople.

When working with an investment advisor, measuring your advisor’s progress against your goal is simple:  Make sure they outperform the market by at least the value of their fee, every year — not on average.

This is also why one of the most important questions to ask an advisor is: “How has my portfolio performed, net of fees, in comparison to the market?”

Finally,  what if you don’t have money to invest right now, and just need help with budgets, insurance, and debt reduction, for example? Financial planners can actually be very helpful in setting you up with a plan. However, know that one thing an advisor or planner cannot do for you is change your overspending or other bad financial habits. This, in my opinion, has a giant impact on one’s future financial success.

To learn more and see different advisors in action, join the #MONEYBOSS AMA on Oct. 14, 2015 at 6:30 pm in New York City and via livestream, featuring four awesome financial professionals: a Certified Financial Planner, a Registered Investment Advisor, an Investment Banker, and a Financial Therapist. Sign up here.

Jane Barratt is a member of the DailyWorth Connect program. Read more about the program here.