Allowing a financial advisor to help you manage your investments can be nerve-wracking, especially if you don’t know how to find a good advisor. We’ll help you know how conduct your search, which qualities and certifications to look for, and what to expect out of your financial advisor.
It depends. To answer this question, you’ll need to do a quick assessment. Are you comfortable with your financial situation and your ability to create an investment plan? If not, a financial advisor can be a helpful resource. Additionally, if you experience big life changes like receiving and inheritance, or if you tend to be an emotional investor, an advisor can help.
The amount you’ll pay for an advisor will vary based on your advisor's fee structure. Some of the common fee structures that advisors charge include a percentage of your assets, commission, a combination of fees and commission, hourly rate, flat fee, and a retainer fee.
A financial advisor specializing in retirement can help you make decisions now that will provide benefits when you retire. For example, they can advise you on when to take Social Security benefits, which pension distributions are best for you, if an annuity is the right choice, and if you’ll need long-term care insurance.
There are numerous robo-advisors that can automate investing for you. But, remember that automated investing doesn’t mean you won’t devote time and mental energy to making investment decisions. If you don’t have time or energy for that, a financial advisor could be well worth their fee, especially considering they likely have a wider knowledge base than you do.
You can use a variety of methods to vet your advisor. Ask them which agency oversees their business. Is it FINRA? Or the SEC? Inquire about their professional designations. Check their FINRA file to see if they’ve had complaints or decisions against them.
Financial advisors are typically registered with the SEC or FINRA and provide investment advice but may not offer financial planning. Financial planners, on the other hand, usually offer planning and have a CFP or CFA certification. There can be crossover between the two, but, in general, not all advisors are planners, and not all planners are advisors.
A registered investment advisor (RIA), or adviser, is a person or firm that provides advice on buying or selling securities. If it's a company, an RIA is typically a limited liability company, limited partnership, or other business entity that has registered with the Securities and Exchange Commission—if it has $25 million or more of assets under management or provides advice to investment company clients—or with the state it's located in.
A mutual fund is a collection of stocks, bonds, or other securities. When you buy a mutual fund, you own the share of the mutual fund. The price of each mutual fund share is called its NAV or net asset value. That's the total value of all the securities it owns divided by the number of the mutual fund's shares.
Wealth management is a kind of financial advisory service for accredited investors and other people with high net worths. Wealth managers provide advice about investing, estate planning, taxes, and anything else that could help grow a client's wealth.
Fee-only financial advisors are only compensated directly by their clients. This is different from other models that reward advisors with commissions for the products they sell.
Stocks represent ownership in a publicly-traded company. When you buy a company's stock, you become part-owner of that company.
If you own any financial assets, you have a portfolio, whether you realize it or not. A portfolio is the combination of all the assets you own. Financial assets such as stocks, bonds, and cash are all part of your investment portfolio, but it also can include other assets, like real estate.
Robo-advisors are automated portfolio managers. You can think of them as an autopilot for investors. When you sign up to use one, you will first answer a series of questions about your financial resources and goals. Then, the robo-advisor will make ongoing decisions about how to invest your money.
Betterment is an online-only financial services provider offering investing, checking and savings accounts. Betterment launched in 2010 with the goal of helping people learn how to reach their retirement goals without the sometimes-prohibitive cost of hiring a financial advisor.
An exchange-traded fund (ETF) is a type of investment security that groups assets together and passively tracks an underlying benchmark index, such as the S&P 500.
Investment advisor fees are fees that your advisor charges you for their services. In most cases, your advisor will charge you a flat or tiered fee. In some cases, they might charge you based on the asset classes your invest in.