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Home›Financial planner›Financial advisor, financial planner or robo-advisor? Here’s how to find the right helper for managing your money

Financial advisor, financial planner or robo-advisor? Here’s how to find the right helper for managing your money

By Mark L. Wells
August 19, 2021
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José Luis Pelaez inc. | Getty Images

If you are looking for professional help with your finances, it can be difficult to know where to start.

From sorting through industry certifications to understanding fees, the process can seem overwhelming.

On the one hand, you need to make sure that anyone you are considering hiring is capable of handling your money and investments. Professional designations such as Certified Financial Planner, or CFP, can help you sort through the options available, as recipients receive training, testing, and continuing education through their respective organizations.

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“Unlike a medical degree or obtaining your JD [Juris Doctor degree], there is no consistent basic education in financial advice, which is why it can be very important to pay attention to certain proofs of capacity through a designation, ”said Michael Finke, himself CFP and professor of Wealth Management at the American College of Financial Services. .

Then there are the management fees involved, which vary. There are fee-based advisors, who typically charge a percentage of assets under management – typically around 1% per year – or hourly fees, which average between $ 200 and $ 400. Others earn a commission on the products they sell, while others, called fee-based advisers, may take both approaches.

Look for advisors who are regulated as trustees because they are required by law to look after the best interests of their clients.

“You have to question the advisor,” he said. “Ask them what their process is.

“Ask them how they are paid,” added Finke. “You want to look for evidence of ability. “

Also, look for someone who has been actively advising clients long enough to have experienced a market downturn, such as the 2008 financial crisis, said Winnie Sun, co-founder and CEO of Sun Group Wealth Partners in Irvine, Calif.

“They can help give you advice on how to manage your money in good and bad years,” said Sun, a member of the CNBC Financial Advisor Council.

The CFP designation is generally considered the gold standard in financial planning because rigorous training and testing is involved. CFPs look at your entire financial situation and develop a comprehensive plan based on your needs.

Those who may not have a lot of money should look for someone who charges an hourly rate, as advisors who charge based on assets under management may have a minimum asset requirement.

Hourly planners are also suitable for those who do not need an ongoing relationship with an advisor, said CFP Ben Jacobs, senior financial planner at Elwood and Goetz Wealth Advisory Group based in Athens, Georgia. He also chairs the National Association of Personal Financial Advisors committee for new advisors.

If someone says they are CFP, you can check it on the CFP Council website, which will not only confirm if the person has the designation, but also list any possible disciplinary actions taken against the individual.

Another comprehensive financial planning designation is Chartered Financial Consultant, or ChFC, which has a similar curriculum as the CFP designation. You can check someone’s designation through YourAdvisorGuide, offered by the American College of Financial Services.

Some planners also earn additional specialist certifications, such as wealth management, retirement income planning, or special needs planning.

Meanwhile, registered investment advisers are also trustees and are registered with the Securities and Exchange Commission or their respective states. They may have additional credentials such as CFP.

You can view a full list of financial professional designations on the Financial Sector Regulatory Authority’s website. It also provides links to the various accreditation organizations, which can be useful in vetting an individual.

Some financial experts advise to stay away from advisers who are commission-based only because they are not legally obligated to have your best interests at heart.

“Taking commissions really introduces a very big conflict of interest,” Jacobs said.

That said, there are cases where it makes sense, said Finke of the American College of Financial Services.

He likens it to a mortgage broker, who earns a commission for selling a loan but also does his homework and recommends a product that is well suited to your particular situation. When it comes to investing, this can include annuities and mutual funds.

“Some consumers would be better off with a product that has a unique expense,” said Finke.

undrey | iStock | Getty Images

Another option is a robo-advisor, which is a digital platform that provides largely algorithm-based financial planning services.

“If saving for retirement is your primary goal, then a robot advisor can handle this planning process well enough for most average workers to give them everything they need,” said Finke.

Annual management fees typically range from 0.25% to 0.5% of your assets, according to Bankrate.

Sun understands the importance of robo-consulting for certain clients, such as those who are just starting out or who have simple needs, and has incorporated it into their practice.

“It helps them manage their money properly, with the idea that when they’re ready, they can then move on to full service,” she said.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.


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