It’s amazing how many of my friends (and even close family) still don’t know what I do for a living. Many of them think I sell stuff – investments, insurance, or annuities. I can’t blame them for that misconception because of the roughly 310,000 financial advisors in the U.S., the majority of them (over 90%) sell products and receive commissions in one way or another. Don't get me wrong, I own a business so I do sell...(just not products), but financial advice.
Sadly, the financial industry too often uses jargon that confuses the consumer. As crazy as it may sound, anyone can call themselves a financial advisor, financial planner. Moreover, not every financial planner is certified. A CERTIFIED FINANCIAL PLANNER™ professional (someone with the CFP® marks behind their name) has an ethical obligation to act in your best interest.
For example, someone whose main function is selling insurance and financial products can also call themselves a financial advisor. This person may or may not provide any actual advice. Too often I’ve seen people think they were working with a true financial advisor when in reality they were being sold a collection of financial products that were overpriced and not necessarily in their best interest. Regardless of their title, my hope is to provide you with an idea of what to look for.
What Does a Financial Advisor Do?
Most people associate financial advisors with investing. Which, yes, I do invest people’s money. But I also do much more. I look at the whole financial picture for my clients. I act as their financial co-pilot, help control their financial behaviors, and avoid emotionally driven decisions in important money matters.
Investments are only one part of the puzzle. More important is helping keep my clients accountable and ensuring they follow thru on financial commitments, in short keeping their financial house in order. This is the reason I named my firm Afflora Financial Life Planning.
The reasons why people hire a financial advisor vary. While some believe they do not have the expertise, I find most of my clients don't have the time or the desire to actively plan and manage their finances. This is probably the same rationale why you hire the accountant to prepare your taxes, a house cleaner, or a lawn service. It provides you with the time to focus on other important aspects of your life. Besides doing it alone can be scary...the reality is there are no do-overs when it comes to planning your retirement.
A good financial advisor can help you avoid financial mistakes, find missed opportunities, and help you stick to your plan in times of stress. A Vanguard study found that working with a professional advisor can add value when compared to a “do-it-yourself” approach.
Generalist vs Specialist
Some financial advisors are considered “generalists” similar to your general practitioner doctor. They can help with a broad range of financial planning issues and serve a wide variety of different clients. Others, like myself, are considered “specialists” where they have a specialty or niche and focus to understand the unique financial needs of a particular group like medical professionals or business owners.
My practice has two specialties: Retirees, or those close to it (typically within 5 years) which makes up roughly 88% of the households I work with. I also work with widows which makes up almost a third of my clientele. If you follow my blog, you'll notice most of the topics I write about address the issues these groups face like: How Much Money Do I Need To Retire?
I recommend looking for a financial advisor that has experience dealing with clients with your unique situation and needs.
Before selecting a financial advisor, ask a number of questions. Start this process with YOURSELF by asking what type of help and advice am I seeking?
When selecting an advisor, ask these questions among others:
- Do you work with other clients with situations similar to mine?
- How can you help me?
- How and how often will we communicate?
- What services do you offer?
- How are you compensated?
- What conflicts of interest do you have that might impact the objectivity of the advice you’d provide?
- What credentials do you have in terms of education and certifications?
I hope this alleviates some of the confusion and satisfies your curiosity. If you're interested in working together, give me a call at (785) 256-9150 or schedule your FREE initial consultation here. Even if I’m not the right advisor for you I’ll try to help and point you in the right direction.
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Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.