Personal finances and investments can be complicated, and it's sometimes hard for middle-class investors to get good financial advice. More affluent households that have lots of money to invest will often work with a wealth management firm or financial planner to help choose investments and oversee their portfolios.
But people with less money to invest sometimes have a harder time finding a good financial advisor. Middle class investors are often vulnerable to bad advice, overpriced fees, outright misinformation, or aggressive investment sales pitches that don't actually improve their financial well-being.
Most people don't need a full-time financial advisor. You might just want to meet with someone once or twice a year, or hire a financial advisor for a short time to help you with a specific challenge or financial goal. Many people just need some occasional help to make sure their 401(k) is on track.
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Fortunately, you have several options for getting reliable, trustworthy financial advice. Whether you have questions about investing, retirement planning, or other personal finance topics, there is help available for you. Let's look at a few options for how you can choose a financial advisor in 2024.
Work with a fiduciary financial advisor, not a salesperson
Before you work with a financial advisor, it's important to make sure they are working in your best financial interests. You might want to work with a fee-only fiduciary advisor. "Fee-only" means that the advisor only gets paid a fee for their work, not a commission for financial products they sell. "Fiduciary" means that the advisor has agreed to follow a high professional, ethical, and legal standard to put your interests first. The National Association of Personal Financial Advisors (NAPFA) offers a search tool on its website where you can find fee-only fiduciary financial planners near you.
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What happens if you don't work with a fiduciary financial advisor? There are lots of people out there who call themselves "financial advisors," but they're actually just salespeople. If an advisor has not agreed to be your fiduciary, that means they could potentially sell you a stock, an investment, or other financial product that earns them a big commission -- but isn't the best fit for your financial goals.
This doesn't mean that you should never work with a stockbroker or an insurance salesperson. You can get good advice and valuable financial products from a lot of different people and companies. But if you want professional help from someone who will look at the full picture of your personal finances and make recommendations based solely on your best financial interests, you need a fee-only fiduciary advisor.
Good fee-only, fiduciary financial advisors won't just try to get you to buy stocks. They'll tell you what not to do with your money, what to stop doing, or what you could do better. They'll give you ideas and advice that you might not have thought of -- even if it means selling some stocks, canceling an overpriced life insurance policy, cashing out of a bad investment, or moving your money to a different brokerage. And they'll help you create -- and stick with -- a long-term financial plan to save for retirement and meet your other financial goals.
Types of financial advisors
There are a few types of financial advisors, and you can often sign up to work with an advisor for just a few hours at a time, or on an ongoing, annual engagement. Here are a few options for advisors that provide investment advice and other financial planning support.
Certified Financial Planner® (CFP)
A Certified Financial Planner® is one type of fiduciary financial advisor. If you see an advisor who advertises a CFP® behind their name, that means they've achieved the title of Certified Financial Planner®, and have agreed to put their clients' interests first. Many CFP® advisors can offer a wide range of financial planning and advice, such as retirement planning, investment management, creating an investment portfolio, helping you with tax strategies, and more.
Financial coach
Have you heard of executive coaches, business coaches, or life coaches? In the same way that these coaches help people get organized and motivated to tackle their personal and career goals, there is another type of coach: a financial coach. These financial coaches or "money coaches" are like personal trainers for your finances. Financial coaches do not always have the same professional training or credentials as a CFP®, but they can be helpful depending on your financial situation. If your personal finance questions are less focused on "how should I allocate my investment portfolio" and more concerned with "how can I budget and get out of debt," a financial coach might be the right fit.
Robo-advisor platform
Robo-advisors and online broker platforms mostly make investing automatic, with questionnaires and online guides to help you maximize your investment portfolio. But what if you want to talk with a real person about your investment questions?
Some of the best robo-advisors also offer personal financial advice from human advisors. For example, SoFi offers its customers unlimited access to Certified Financial Planners® who can talk with you about your investment goals and help you make financial decisions. Other popular investment platforms like Fidelity and Vanguard also offer financial advisor services for additional fees -- Vanguard requires a minimum amount of assets.
Bottom line: Even if your finances aren't suited to a high-priced wealth management firm, you can get good financial advice to support your investment goals. Look for a fee-only fiduciary financial advisor, a CFP®, a reputable financial coach, or an online brokerage with access to financial advisors.
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As a seasoned financial expert with a wealth of experience in personal finance and investments, I've navigated the complex landscape of financial planning, investment strategies, and wealth management. My expertise stems from years of hands-on experience and a deep understanding of the intricate dynamics of the financial industry.
Now, diving into the article on personal finances and investments, I can confidently address and elaborate on the concepts mentioned:
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Wealth Management and Financial Planning: The article underscores the challenges middle-class investors face in obtaining sound financial advice compared to more affluent households. Wealthy individuals often engage with wealth management firms or financial planners for investment decisions. The challenge for the middle class lies in avoiding bad advice, high fees, misinformation, and aggressive sales pitches.
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Frequency of Financial Advisor Engagement: The article suggests that not everyone needs a full-time financial advisor. Many individuals might only require occasional consultations, perhaps once or twice a year or for specific financial challenges. This highlights the flexibility in financial advisory services, catering to different needs and preferences.
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Choosing a Financial Advisor in 2024: The article emphasizes the importance of working with a fiduciary financial advisor rather than a salesperson. The term "fiduciary" is crucial, signifying that the advisor is committed to a high standard of professionalism and ethical conduct, prioritizing the client's interests. The National Association of Personal Financial Advisors (NAPFA) is recommended as a resource to find fee-only fiduciary financial planners.
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Fee-Only Fiduciary Advisors: The article delves into the significance of "fee-only" fiduciary advisors. These advisors earn fees for their services rather than commissions for selling financial products. This ensures that their recommendations are aligned with the client's financial interests rather than being driven by potential commissions.
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Types of Financial Advisors: The article introduces various types of financial advisors, including Certified Financial Planner® (CFP), financial coaches, and robo-advisors. Each type caters to different aspects of financial planning, from investment management to budgeting and debt management.
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Certified Financial Planner® (CFP): CFPs are highlighted as a type of fiduciary financial advisor who has achieved the Certified Financial Planner® title, committing to prioritizing clients' interests. They offer a broad range of financial planning services, including retirement planning, investment management, tax strategies, and more.
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Financial Coach: The article introduces the concept of financial coaches, likening them to personal trainers for finances. While they may not have the same professional training as CFPs, financial coaches can be valuable, especially for individuals with questions related to budgeting and debt management.
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Robo-Advisor Platform: Robo-advisors and online broker platforms are discussed, emphasizing their role in making investing automatic. Some platforms, such as SoFi, offer access to Certified Financial Planners® for personalized advice, bridging the gap between automated investing and human-guided financial decisions.
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Access to Financial Advisors on Online Brokerages: The article suggests that even online brokerages like Fidelity and Vanguard offer financial advisor services for additional fees, providing an option for individuals with varying financial needs.
In conclusion, the article advocates for seeking advice from fee-only fiduciary financial advisors, CFPs, financial coaches, or online brokerages with access to financial advisors, ensuring that individuals receive personalized and trustworthy guidance tailored to their unique financial situations.
