Learning from Financial Advisors

PUBLISHED Jun 2, 2022, 5:25:50 PM        SHARE

imgGlenda Wagner

Famous financial advisors are known for different reasons. Some are investors who share knowledge with those interested in their success. Others are celebrities who write books. Even criminals that have stolen money have become well-known. There are various reasons for their notoriety.

Warren Buffet and Benjamin Graham are two financial advisors who rely on value investing. Robert Kiyosaki and Dave Ramsey are known for the publications they write. Ben Stein and Suze Orman are recognizable financial advisors. Bernie Madoff and Charles Ponzi are known for their financial crimes.

Warren Buffet is probably the best known among investors of the people listed above. He has a long history in the financial advising industry. His style of investing is derived from Benjamin Graham. Dave Ramsey, Jim Cramer, and Suze Orman are other media financial advisors.

Financial Planners and Financial Advisors

A financial advisor helps clients manage their money. They offer a broader array of services and often assist with operational or short-term aspects of finances. Financial planners are professionals who help create strategies for achieving long-term financial goals.

Many financial advisors host free meet-and-greet sessions. The consultations are an excellent way to learn about the person, their strategies, and whether to trust them with managing your finances. When you begin to work with a financial advisor, they often charge a fixed fee or commission.

Financial advisors may be an integral part of a person’s financial planning. They provide connections to other professionals, such as insurance or tax advisors. Other people prefer to manage finances on their own.

Both approaches are valid, but it is helpful to be aware of the types of financial services and advisors available for guidance when needed. Financial planners, investment advisors, brokers, and wealth managers are the most common financial advisors.

A financial planner focuses on financial planning, such as developing a holistic plan to help reach financial goals. An investment advisor specializes in managing an investment portfolio and assists with day-to-day investment management, such as when to buy and sell stock.

A broker places trades on behalf of clients. Unlike investment advisors, they do not make buying and selling stock decisions. They act on instructions from you. A wealth manager provides a broad range of services, from tax management and estate planning to financial planning. Most of them only work with high-net-worth clients.

Pros and Cons

There are advantages and disadvantages to working with financial advisors. You may want to get the help of a financial advisor if you are not sure you are saving a sufficient amount to achieve your financial goals. If you struggle to create a financial plan, an advisor can be helpful.

Help with choosing and managing investments is a reason to seek the aid of a financial advisor. They can help determine when to buy and sell assets or evaluate your current financial situation.

While financial advisors help navigate financial matters, there are downsides. They can charge high fees. If they earn commissions on products, they may be incentivized to sell you higher-cost products. Not all advisors help create financial plans. Some provide limited services like investment management only.

The Cost of Financial Advisors

A financial advisor often charges fees based on how much money a person invests with them, referred to as assets under management. The average AUM fee is one percent per year but can vary depending on the provided services. Some advisors charge a flat fee or hourly rate for services. A financial plan may cost $2000. Advisors can earn commissions on products they sell also.

Who Should Use a Financial Advisor?

While a financial advisor can be an excellent resource to help navigate financial matters, not everyone needs one. It is smart to enlist the help of a financial advisor when the situation is too complex for an internet search to answer a question, you do not want to conduct the research needed to invest, or making financial decisions is overwhelming. If a couple or household members disagree on managing finances, working with a financial advisor may be helpful.

How to Find a Financial Advisor

An online search is the most accessible resource for finding a financial advisor. You can use an online financial advisor database or a search engine. Financial associations, such as the National Association of Personal Finance and the Garrett Planning Network, have resources that help locate financial advisors. You can check advisors’ history and license with two tools the government provides. They are Investor.org and brokercheck.finra.org.

Advice from an Expert

An online search for any of the well-known financial advisors mentioned above can offer some insight into money management. One of the best is Suze Orman. She gives these five pieces of advice.

  • Transfer credit card debt to cards with zero-percent APR
  • Regularly check your credit report
  • Track spending
  • Create an emergency fund
  • Diversify investments.

Transferring credit card balances to a zero-percent card is an excellent move for people with significant credit card debt. There is usually a balance transfer fee, but many cards offer a 15 to 18–month zero-percent APR that adds no additional interest as you pay off the debt.

Your credit score is a big deal. A free annual credit card report is available to everyone. It does not provide a credit score but gives a view of your credit situation. You see the areas that need to improve.

There may be reporting errors or indications of fraud that you can get corrected. It is a challenge to know where your money goes if you do not keep track of spending. You may be unaware of unnecessary purchases or money being wasted.

An emergency fund helps during stressful financial situations. Unexpected expenses that arise without money set aside may cause more credit card debt. Start small and establish a long-term goal of money for eight months of living expenses.

Investing helps set you up for the future but can be a financial risk. Minimize the risk by diversifying your investments. Investing in EFTs (Exchange-Trade Funds) is a simple way to diversify.

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