How to find a financial advisor or planner at any age
When considering hiring a financial advisor or planner, age matters – your age, and what your needs are at that point in your life. Throughout your life, your goals, income, and circumstances will pull you in a thousand different directions. Your 29-year-old financial advisor may be wrong for you as you approach retirement. A counselor who helped you save for your children’s education might not be the best way to help you get back into the workforce at age 62.
If you are just starting out in your career, you may be looking for a financial professional who can improve your financial literacy and teach you how money fits into your life. Topics you may need help with could include how to manage debt, avoid future debt, save regularly, buy a first home, and plan financially for marriage and family.
Over time, your needs and income will likely become more focused and stable. This is the time when you may be saving for the education of a child, assessing your family’s income and tracking what career advancement with higher compensation might mean, and begin planning for a solid retirement, which may include a second home, generous money for health care costs, and travel.
- As your working life begins, managing debt and learning to save may be of most interest.
- Five to seven years in a career, the highlights may be earning a lucrative salary and increasing savings and investments.
- Adults of retirement age may need counseling to stay on track financially.
- Some retirees may decide that they want or need to return to work after consulting with a financial advisor.
Retirement comes with a variety of decisions
As you near retirement, it may be because all your plans and savings are realized, or you’ve decided that an extended working life is the best thing to do because you need more savings, specifically retirement funds.
In retirement, you may be living off the fat of a well-planned life, and you may have the time, good health, and money to spend on something special, such as funding a child’s education or granting a foundation. Or you may need or want to go back to work.
Along the way, life happens without warning, which can lead you and your careful financial planning into an episode. This is why having an emergency fund and the right insurance is key to keeping you afloat, and is something a financial planner can advise you on. You may lose a job, get a divorce, deal with a serious illness (whether it is your own or a loved one), have a life-changing accident, inherit a large sum of money, or be forced by circumstances to adopt a child or children from one of your relatives.
What do you know about fees?
The fee for paying for the services of a financial advisor or planner is another point to consider. But surprisingly, many clients are confused and unaware of what, if any, they are paying advisors for advice, according to a survey conducted by the Financial Industry Regulatory Authority (FINRA) and the Investor Education Foundation. The FINRA study reported that 17% of investors do not know what they are paying in investment fees, 14% do not even know if they pay any fees at all, and 60% of those who work with a financial professional do not know it. I don’t think they pay for advice.
Naturally, you will pay for the services of a financial advisor. Younger investors with limited funds may be more sensitive about adding a financial planner’s fee to their budget. However, it is an area that all investors should pay attention to. Here are five ways financial advisors charge for their services:
- Financial advisors that charge based on the Asset Under Management (AUM) fee structure will charge their clients a percentage based on the total dollar amount of the assets they manage. The more assets that clients have, the lower the percentage they pay for consulting services, despite the higher the total dollar fee they pay.
- Commission-based financial advisors receive a fee or compensation based on product sales. They receive a fee when their clients make a specific financial transaction they recommend, such as buying a stock or other asset.
- Consultants can also charge clients hourly fees in lieu of commissions or a certain percentage of AUM. Fees can start at $100 an hour and go up much higher.
- Financial advisors who charge a flat fee will often provide their clients with a list of services and the fees they charge for each service. Self-directed investors tend to pay a flat fee to advisors or go with hourly payment plans. They often only seek suggestions from advisors or the option of using complex asset allocation models.
- Fee-only financial advisors do not accept commissions or compensation based on product sales. Fee-only consultants can structure their fees in several other ways. They can charge by the hour, depending on the project, through AUM, or by a combination of these. Since their income does not come from the sale of financial products, fee-only consultants are often seen as less biased and more focused on providing personalized advice to clients based on the client’s financial goals and best interests.
Tips to narrow your search
Whatever your age, the same basic steps apply when setting out to find your own financial advisor or planner. Key among these is the professional’s credentials, experience, and ability to explain financial concepts in clear language that keeps you better informed to make the right decisions for you and your family. The National Association of Personal Financial Advisors (NAPFA) offers a checklist on how to assess a financial professional:
- Talk with loved ones about what you want to achieve by working with a counselor.
- Create a list of advisors, grouped through word of mouth advice, professional organizations or lists. One place to start is Investopedia 100, our annual list of top independent financial advisors in the United States.
- Do your homework to candidates and reach three professionals by reviewing websites, checking for any disciplinary action. You’ll find shortcuts through FINRA’s BrokerCheck website and the Certified Financial Planner (CFP) Board website, both of which can help you evaluate brokers.
- Make a list of questions to ask candidates, starting with asking about their approach, fee structure, and how their work has helped clients.
- Meet them face to face, if possible, or via video conference.
- Make sure that you feel confident about the experience and credentials and that you are comfortable talking with the counselor or planner of your choice.
What credentials should a financial advisor or planner have?
There are three designations a qualified financial planner may have, but the first is the most important: CFP. The CFP is a formal recognition of experience in the areas of financial planning, taxation, insurance, estate planning, and retirement (such as 401(k)s). Owned and authorized by the CFP Board of Standards Inc. , the designation is granted to individuals who have successfully completed the initial CFP Board examinations and then proceed to annual continuing education programs to maintain their skills and certifications.
The best prepared financial advisor has a Chartered Financial Analyst (CFA). The Chartered Financial Analyst is a globally recognized professional designation offered by the Institute of Chartered Financial Analysts (formerly the Association for Investment Management and Research, or AIMR) that measures and certifies the competence and integrity of financial analysts. Candidates are required to pass three levels of examinations covering accounting, economics, ethics, money management and security analysis.
If you have a position that deals specifically with taxation and accounting, you may want to get a counselor who is also a certified public accountant (CPA). CPA is a designation for licensed accounting professionals. A CPA license is provided by each state’s accounting board. The American Institute of Certified Public Accountants (AICPA) provides resources for obtaining licensure. The CPA designation helps enforce professional standards in the accounting industry. Other countries have certifications equivalent to the CPA designation, notably the Chartered Accountant (CA) designation.
What is Generation Z?
Generation Z is the nickname many demographic researchers give the current generation of young people. According to the Pew Research Center, Generation Z consists of people born in the 1997-2012 era. The oldest members of this generation are 25 years old, and many are now out of college, getting married, and starting families. They are following millennials (born 1981 to 1996). As a result of the COVID-19 pandemic, members of Generation Z face a more uncertain future than did previous generations.
What is retirement planning?
Retirement planning defines retirement income goals and the actions and decisions needed to achieve those goals. Retirement planning includes determining income sources, the amount of expenses, implementing a savings program, and managing assets and risks. The future cash flows are estimated to measure whether the retirement income goal will be met. Some retirement plans change depending on whether you’re in the United States or Canada, for example, which has a unique system of plans sponsored by your workplace.
What is a financial advisor?
A financial advisor is a professional who helps people manage their money through investing, retirement planning, estate planning, having children, and more, depending on the advisor’s qualifications, experience, and appointments.
It is wise to have the right financial advisor or planner in your arsenal of professionals who help you make sound decisions, no matter your age. Young investors may be more interested in learning to reduce debt and save more, while retired individuals still have many financial decisions to make that require professional input.