3 Misconceptions About Working With A Financial Advisor

With more finance information available online, financial advice is easier to find than ever before. But finding the right financial advice for you is still a challenge. Everyone’s financial needs and situations are different, so one size fits all instructions aren’t the best solution. 

Whether you’re trying to build savings, you’ve come into new money, or are making a big life change, it can be hard to know which financial actions to take to build wealth and stability. If you’re not sure about working with a financial advisor, keep reading. Here are three common misconceptions about working with a financial advisor.

Misconception #1
A financial advisor just offers stock picks and executes transactions for me.

If you are unclear about what a financial advisor actually does, you’re not alone. According to a survey by the Insured Retirement Institute and the Center for Generational Kinetics, only 38 percent of Millennials even know what a financial advisor does¹. 

It’s hard to justify paying for something when you don’t even know what you’ll get from the relationship. The confusion is hardly surprising though. Because there are so many different types of advisors, distinguishing between them can be challenging. 

Broadly, an advisor looks at your financial situation and suggests strategies and investment products to help you achieve your financial goals. They work with you to understand your current financial picture, set goals for your future, and provide a roadmap to help you reach those goals.

Some examples of when meeting with a financial advisor can be helpful include: when you’re planning to purchase a home or car; if you’ve changed jobs and decreased or increased your salary; you’re making a big change in your business; when you’re going through a life change, like having children, becoming and empty nester, getting married or divorced, or nearing retirement.

Misconception #2
Financial advisors are only for the rich.

It’s a common misconception: If you’re not part of the one-percent, you won’t be able to benefit from a financial advisor. The truth is, while there are financial advisors that do work exclusively with the ultrawealthy, most work with everyday people.

If the cost to work with a financial professional seems like a barrier to entry, remember there are advisors who specialize in helping those just starting out or are just beginning to amass wealth. There are also payment structures to fit different budgets; here are a few to consider. 

• Fee-only: These are registered investment advisors who charge only for their time and do not receive commissions from the investments they recommend. They may charge a flat fee or take a percentage of the total assets they manage for you. Sometimes these advisors operate on a tiered fixed-fee schedule based on the value of your assets under their management.
• Fee-based: These advisors typically charge you a fee for their advice as well as receive commissions for the products they select to implement that advice. Their fees may be lower than fee-only advisors because they are recouping some of the difference in the commissions and incentives they receive from product sales.
• Commission only: This pay structure typically applies to an investment advisor or broker who works for a large firm. The advisor (and thus the firm) earns a commission each time a client makes an investment transaction. The more transactions the advisor conducts for his clients, the more earnings he receives.

Misconception #3
A financial advisor is looking to make a profit, and doesn’t operate with my best interest in mind.

Since this is your hard-earned money, finding an advisor you trust and one that will work with you in a true partnership is key. In addition to the fee structure your advisor operates within, there are several factors to  consider when determining if an advisor is going to be someone you can trust and partner with. Before you meet with one, here are a few things to keep in mind:

• Reputation: Check out online if the advisor is reputable; if they have online reviews, are they positive/negative?
• Testimonials: If the adviser has recommendations or client testimonials on their site or literature, are they recent? Do they seem trustworthy?
• Credentials: You may want to seek out a financial professional with specific expertise, to find the right fit for your needs. Look at the letters listed after their name to find an advisor’s accreditations.

Another potential consideration is to find out if your financial advisor acts as fiduciary. In simplest terms, an advisor that operates as a fiduciary is bound legally and ethically to operate in the client’s best interest—essentially putting their clients’ interests above their own. 

A fiduciary must disclose to you if they receive any compensation from the provider of a specific account, such as a mutual fund, for recommending it to you. With the fiduciary rule, even if an advisor does receive money from a provider, they must also be able to show that they are acting in your best interest by recommending that investment to you.

Conclusion

Ultimately choosing a reputable advisor who understands your unique financial goals and is committed to helping you achieve them is essential. You should be the judge of whether your selected advisor fits the bill for your specific needs and is someone you can trust to act in your best interests.

No matter what your finances look like, meeting with a financial advisor is a great way to take charge of your wealth and set yourself up to maximize your assets—like home equity, investments, retirement funds, or money in savings. Ready to consider working with a financial advisor? Contact Blueprint 360 to discuss how we can help build a strong financial future together.

1. “Will Millennials Ever Be Able to Retire?” Insured Retirement Institute and The Center for Generational Kinetics. 2015. https://genhq.com/wp-content/uploads/2016/01/White-Paper-Will-Millennial...

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Charles Adi, and all rights are reserved. Read the full disclaimer here.