- Myth: Investment advisers and financial planners are the same thing.
If you’re asking yourself whether you are ready to benefit from professional financial advice, one of the first things you need to understand is the difference between a financial planner and an investment adviser. An investment adviser helps you decide what to invest in, whereas a financial planner takes a holistic approach, advising you on your entire financial picture. (Some financial planners are also investment advisers, but this is not always the case.)You may not need professional investment advice until your assets reach a certain level, but long before that time arrives, you are likely to have questions about credit card debt, handling student loan debt, saving for retirement, or how much house you can really afford to buy. A financial planner will be able to develop a comprehensive financial plan for you that will address all these questions, and move you toward your goals. - Myth: You need to be of a certain age or have substantial assets to invest before you can benefit from advice from a financial planner.Many people assume that if they don’t have a lot of assets to invest, a financial planner can’t help them, but the truth is financial planning is about a lot more than your investments. It’s about strengthening your financial picture and building a secure future—and that covers a lot of ground. How a financial planner can help you is less about your bank balance and chronological age and more about your circumstances or the life transitions you’re experiencing.When it comes to dealing with our money, we all have questions, regardless of our age or net worth. In many ways, having a financial planner is similar to having a good personal physician who knows your medical history and can advise you knowledgeably whenever a medical issue comes up. Will there be issues that you can research and resolve on your own? Of course. But access to an expert to help and guide you when you need it will give you confidence and peace of mind.
Some ways that a financial planner can help you – regardless of your net worth:
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- Getting unstuck. Many clients tell me that simply having an expert at their back defuses their anxiety and gives them the confidence to move forward and deal with their money. Many people put off dealing with their money for fear of making a mistake or being judged. Knowing you have someone on your team to help you course-correct if needed is hugely empowering.
- Prioritizing next steps. A financial planner can help you understand your financial picture and identify the most important next steps you should take to improve your situation – for example, paying down your credit cards or building an emergency fund. Everyone’s situation is different, and taking the guesswork out of the equation lets you focus your time and energy on what will benefit you most.
- Protecting what you have. A financial planner can help you do an insurance checkup once a year to make sure your assets and future are adequately protected from liability. Remember, dealing with your money is about protecting what you already have, not just growing your bank balance.
- Navigating life transitions. A financial planner can help you navigate the financial implications of big life transitions, such as a new baby, divorce, or a career change. It’s very easy to ignore financial issues when your life is in flux, but the choices you make at these times can have long-term consequences on your financial wellbeing. Get help and make the best possible decisions.
- Myth: All financial planners are the same, so it doesn’t matter whom you choose to work with – just cross your fingers and hope for the best.Your financial health is the foundation of a secure future, so approach choosing a financial planner with the same care that you would give to choosing a physician. Here are things to look for:
- It’s a good idea to check a financial planner’s professional background at the Financial Industry Regulatory Authority (Finra) or the Certified Financial Planner Board of Standards.
- Select a fee-only financial planner. Because they operate under a fiduciary duty, by law fee-only financial planners must have their clients’ best interest at heart. You won’t have to worry about conflict of interest, because they don’t accept commissions based on product sales or their recommendations. Instead, they receive a flat fee for looking at your financial picture holistically and then giving you advice that’s unbiased and independent. Many fee-only financial planners also carry professional designations that hold them to strict codes of professional and ethical conduct. This is the kind of financial help the average person needs to plan and build for the future.
- Once you’re satisfied with his or her credentials and experience, you’ll also want to consider your comfort level with the individual. This is critical. You want someone who listens, who makes you feel respected and heard.
- You may also want to choose someone who is “like you” – who has had similar life experiences. For example, if you are looking for a financial planner because you are going through a divorce, you may be more comfortable choosing someone who has been through a divorce and understands the issues on a personal level.