Depending on your level of assets and tax liability, you may wonder, “Do I need a financial advisor?”
Finding an advisor who fits your needs is important, especially if you’re a high-net-worth client. While a professional’s credentials and certifications are helpful, you should consider their fees, investing approach, and other factors. Click the Best Financial Advisors In Oregon to learn more.
Financial advisors (or advisers) provide expertise for clients’ decisions around money matters and investments. They may offer portfolio management, estate planning, and insurance services. Advisors can work as independent agents or as part of a larger financial firm. They typically must pass exams and obtain licenses to practice. Some advisors also earn professional designations to boost their career prospects.
Qualifications for becoming a financial advisor include a degree in accounting or finance and some business skills. Many colleges and universities offer bachelor’s, master’s, or doctorate degrees in these subjects. A degree in these areas can help you understand the industry’s complexities and make sound choices for your client’s needs. Some advisors choose to take supplementary courses and programs to further their knowledge of specific topics, such as taxes or estate planning.
In addition to academic qualifications, financial advisors need strong communication and critical thinking skills to build trust with their clients. This is especially true as you navigate their clients through potentially stressful situations, such as a job loss or the death of a loved one. You’ll also need to stay current on the industry and understand how new laws and regulations affect your clients’ ability to accomplish their goals.
A financial advisor is likely to work from an office, a call center or at their own home or a client’s home or workplace. Your duties include meeting with clients to discuss their finances and goals, researching products and making recommendations, negotiating with product providers, updating your clients and carrying out other administrative tasks. You’ll need to have excellent organization and attention to detail to keep track of your client records and business activities.
In some cases, financial advisors must complete continuing education requirements to maintain their licenses. This is a way to ensure that they’re up-to-date on changes in the industry and continue to be able to offer their clients a high level of service. The requirements for these classes vary by state. Some advisors also choose to take extra classes to improve their soft skills, such as time management or interpersonal communications.
Fees
There’s no one-size-fits-all answer to how much a financial advisor should charge. The cost will depend on your individual situation and the type of services you require. However, it’s important to understand the different fee structures and what each includes so you can make an informed decision that aligns with your financial goals.
One common method is to charge a percentage of assets managed, which may be flat or follow a tiered schedule based on your asset level. Another option is to charge an hourly rate, which can be helpful for specialized projects or consulting. Lastly, some advisors may offer a lump sum upfront for services such as creating a financial plan.
Some advisors also earn third-party sales commissions, which is compensation based on the sale of certain financial products like mutual funds and insurance policies. These fees are typically a red flag as they can create conflicts of interest that undermine your fiduciary duty. Generally, advisors who earn commissions are dually registered as broker-dealer representatives and insurance agents and held to suitability standards.
Other advisors may choose to be fee-only or fee-based. While both can still have potential conflicts of interest, fee-only advisors typically hold themselves to fiduciary standards and are required to disclose any possible conflicts. Fee-based advisors, on the other hand, may pause their fiduciary duty when recommending commission-based products, such as certain annuities.
The most effective way to minimize your costs is by selecting a fee structure that aligns with your investment goals and overall wealth strategy. This will help ensure that your advisor is working in your best interests, which is a fiduciary responsibility.
Finally, it’s worth noting that in many cases the all-in fees (advisory fee + underlying investment/platform fees) decline as your account balance rises, according to a 2023 report by advisoryHQ. This supports the notion that the “typical” 1% AUM fee really represents a marginal amount for clients with larger portfolios, and that robo-advisors can compete on this front.
In addition to understanding the various fees charged, it’s important to weigh the value of an advisor’s services. A qualified financial advisor can help you navigate a welter of challenges, including retirement account withdrawal strategies, asset allocation decisions, Social Security claiming strategies and even tax implications.
Portfolio Management
A financial advisor’s job is to help clients achieve their goals. This may include developing investment strategies, educating clients on their options and risk tolerance, and monitoring client accounts. Financial professionals can also provide retirement planning and estate-planning services, which involve navigating inheritance taxes and other laws.
A financial professional’s qualifications should be a major factor in how you choose one. Look for an advisor who is a Certified Financial Planner (CFP) and a Registered Investment Advisor (RIA). This designation requires they meet rigorous education, experience, ethics and examination standards and pledge to put the interests of their clients first. You can check an advisor’s credentials using BrokerCheck, a free service provided by FINRA, the Financial Industry Regulatory Authority. It will provide information on their licensing, employment history and any disciplinary action taken against them while in a brokerage or advisory role.
In addition to being a fiduciary, your financial advisor should provide you with an objective and holistic view of your current financial situation. This will enable you to make decisions about your finances that are in line with your long-term goals and financial comfort level. This may include a review of your current investments, tax situation, and estate plan.
Managing your debt is another common area of expertise for many financial advisors. These professionals can assist you in creating a strategy to manage your debt and help you save money for your future while minimizing interest expenses.
Financial planners can also assist you with achieving your goals by providing education on savings, investing and budgeting. They can offer suggestions on how to best save for your children’s college education, a home purchase or retirement.
As the financial landscape continues to evolve, it is critical to have a knowledgeable and experienced professional in your corner to help you navigate changes and prepare for the unexpected. While it is possible to hire a financial professional on an ad hoc basis, you may find you want to maintain a longer-term relationship with someone who can handle all your financial needs, from retirement planning to asset management to estate planning.
Estate Planning
A financial advisor can help you develop and implement your estate plan. They can help you list your assets, create a trust, limit powers of attorney and make other legal documents. They can also provide guidance regarding beneficiary designations on retirement accounts, insurance policies and other investments. In some cases, they can act as trustees or co-trustees with your family.
The estate planning process is a complicated one that requires the help of professionals, and it should be implemented in tandem with your overall financial plan. The goal of your estate plan is to avoid a lengthy and expensive probate process in the event of your incapacity or death. Financial planners and investment advisors can help you create a comprehensive plan that protects your estate from costly mistakes, including tax pitfalls.
During the estate planning process, it is important for your advisor to understand your needs and goals. The advisor should review your existing estate planning documents to determine if they are suitable for your goals. They should also ensure that the documents are executed properly and funded. Funding refers to the process of retitling and changing account titles so that your assets are positioned to meet the goals in your new estate plan.
When you work with an advisor, they will assess your short and long-term financial goals, income requirements, investments, tolerance for risk, existing debt and other factors. They will then develop a plan that is tailored to your specific needs and objectives. This plan will include an overview of your current situation, recommendations on changes to make and a roadmap for reaching your financial goals.
The right financial advisor can make a significant impact on your long-term success. You can use SmartAsset’s free tool to find vetted advisors who specialize in your area and schedule a call with them for an introductory conversation. During the call, you can ask your advisor match questions about their qualifications and fees, as well as discuss your goals and the type of services you need. Once you’ve found an advisor, you can work together to reach your financial goals and achieve peace of mind.