If you’re not a financial expert, choosing a financial advisor can be a difficult decision. There are so many specialized areas that it can be hard to know which one to choose. For instance, estate planning is different from investing. Financial planning is also different from budgeting.
One of the best ways to start is by choosing a financial advisor who is a robo-manager. This financial advisor can help you manage your investments and make intelligent decisions. They can also help you build a financial plan and manage your risk tolerance. You can start with a simple online account with a fee of only a few dollars.
However, if you’re planning on investing in a more advanced way, such as for estate planning, you might want to consider a human financial advisor. Here are some factors you should consider when choosing a financial advisor.
Know What You Need
Before you start working with a financial advisor, you must identify why you need help. Some questions you should ask include: Do you need help with budgeting? Do you need help with investing or creating a financial plan? These questions will help you determine what kind of financial advisor to look for.
Check Credentials and Background
You should also check the credentials of the individuals working for you. For instance, if you’re looking for a certified financial planner or a chartered financial analyst, these designations require that the individuals act as fiduciary.
Many financial advisors have a lot of experience, and you can thoroughly examine their bodies of knowledge. They also agree to follow a code of ethics.
The code of ethics for financial advisors states that they should act in the best interest of their clients. This includes placing their clients’ interests above their own.
You can check a financial advisor’s credentials by visiting the websites of various professional organizations, such as the Financial Planning Board and the Chartered Financial Analyst Institute. While these credentials don’t guarantee that the individual is working in your interest, they can provide valuable insight.
Know What You Can Pay
Despite the reputation that financial advisors are expensive, there are various options that you can choose from when it comes to selecting a financial advisor. Before you commit to any services, you must understand the cost of doing business.
One of the most common types of fees that financial advisors charge is an annual fee that’s usually a percentage of the account’s balance. Most robo-services charge around 0.25% of the assets that they manage.
A financial planning service or an advisor typically charges either a flat subscription fee or a percentage of your assets. For instance, Personal Capital charges a flat rate of 0.49% to 0.89% of your assets under management. On the other hand, Facet Wealth charges an annual rate of $1,800, which goes up depending on your financial situation.
Traditional financial advisors typically charge a small percentage of the total amount they manage. They can also set a flat fee or a retainer. Some firms additionally offer a variety of fee options, such as a flat rate or an hourly rate.
The amount of money you’ll spend on a financial advisor can vary depending on your budget. For instance, if you have a small amount of money, a robo-advisor may be more cost-effective than an in-person advisor. However, if you have a complex financial situation, a robo-advisor may not be able to provide the guidance that you need.