Find out how to use different types of financial advisors to achieve your goals. Whether you want to build wealth, get answers to complex questions, save money on taxes, protect your assets, plan for retirement, or get the motivation to make changes, there's an advisor for that.
Money Girl
206 MG Six Types of Financial Advisors
Find out how to use different types of financial advisors to achieve your goals. Whether you want to build wealth, get answers to complex questions, save money on taxes, protect your assets, plan for retirement, or get the motivation to make changes, there's an advisor for that.
- Broadcast on:
- 19 Jan 2011
- Audio Format:
- other
Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. Hi friends, and thanks for joining me on the Money Girl podcast. I'm Laura Adams, the author of the brand new book Money Girl Smart Moves to Grow Rich. Now, let's talk about financial advisors. Seeking help from advisors is a smart way to get your personal finances in shape this year. Even if you have a do-it-yourself philosophy about handling your money. Before you make an appointment, however, you should get to know the different types of advisors and understand exactly what they do. Advisors can play a critical role in helping you build wealth, protect your assets, answer complex questions, plan for retirement, improve your money management skills, and break through barriers that are holding you back from accomplishing more. Financial advisors are for everyone, not just the rich and famous. You can meet with an advisor for a one-time consultation or maintain an ongoing relationship. The idea is to find the right advisor for your specific needs. So, without further ado, here are six types of financial advisors, what they do, what they charge, and how they can help you achieve your financial goals. Financial advisor number one, a tax accountant. A tax accountant has expertise in tax planning, filing income tax returns, and preparing financial statements. If you have anything that's complicated when it comes to taxes, like rental property, business interests, self-employment income, or a home office, be sure to hire an accountant to do your taxes. A CPA, or Certified Public Accountant, is generally the best kind to use because they've passed a rigorous exam and are regulated by the state where they work. They make sure you get every possible tax benefit, so you owe as little tax as possible each year. The fee a tax accountant charges depends on the complexity of your situation and the amount of time it takes to complete your return, but it may not be more than a few hundred dollars. In many cases, a good tax accountant will save you more money than they charge. You can find a CPA in your area by visiting the American Institute of CPA's website at AICPA.org. Financial advisor number two, a banker. A banker is a representative of a banking institution, and he or she offers different services depending on the type of bank that they work for. For example, a commercial banker can help you get a business loan and open up appropriate accounts for your small business. A personal banker can help you utilize accounts that earn the most interest, purchase a CD, or open up an IRA. A mortgage banker can evaluate your finances to see if you qualify for a home loan. Most banking services are free to existing customers or to potential new customers, so never be shy about asking a banker for help. Financial advisor number three, an insurance agent. You might not think of an insurance agent as a financial advisor, but they play an important role in helping you protect your wealth. Your license stand regulated at the state level to sell policies for large insurers. Most agents work on commission, but will consult with you about your insurance needs free of charge. It's a good idea to meet with your insurance agent at least once a year to review your policies. Ask them lots of questions so you understand exactly what your insurance covers and what it doesn't. Getting too little insurance is risky, but being overinsured can be expensive. A good insurance agent will help you find the sweet spot where you have affordable coverage that minimizes your exposure to financial risk. Financial advisor number four, a registered investment advisor or RIA. A registered investment advisor is a special type of broker. That's a professional who's licensed to buy and sell securities like stocks and mutual funds. The broker has to recommend, quote, "suitable investments" for clients, but an RIA is held to a higher fiduciary standard, and RIA must put their clients' interest first by making sure that the investments you buy and sell are consistent with your financial goals and long-term objectives. A registered investment advisor manages your portfolio and typically gets paid a percentage of your assets under management rather than a commission on individual transactions like a regular broker does. That gives an RIA a strong incentive to recommend profitable investments that are likely to make your portfolio grow over time. Both brokers and RIA's are regulated by state and federal authorities. You can do a background check on these professionals at finra.org, the website for the Financial Industry Regulatory Authority. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at capella.edu. Financial advisor number five, a financial planner. A financial planner analyzes clients' needs based on their long-term goals. They can create a comprehensive plan or focus on specific issues like investments, insurance, or estate planning. The financial planning industry isn't regulated, which means there's a lot of disparity in qualifications and business practices. There are about 100 different designations that are designed to convey planning expertise. However, many of these designations are irrelevant and lack professional credibility. The most common designation is Certified Financial Planner or CFP because these advisors must pass a comprehensive exam and have a certain amount of experience. Visit cfp.net, the Certified Financial Planner website, to find a professional with this designation. Financial planners are paid in several different ways, including Commission-only, fee-only, salary, or a combination of these methods. In general, you'll receive more objective advice from a fee-only planner who doesn't have an incentive to steer you toward a particular investment or insurance product. Financial planners typically work with you in person but may also consult with you over the phone. Financial advisor number six, a financial coach, a financial coach partners with clients to help them establish and accomplish specific goals. The coaching industry isn't regulated and has a wide range of practitioners who focus on various issues. A qualified coach has broad knowledge of their specific field as well as an ability to inspire you to take action. Financial coaches dig into the details of your existing situation, both financially and personally, to discover what's holding you back from building wealth. Coaches can be used for a specific purpose, like buying a home, creating and sticking to a budget, combining finances with a partner, or choosing employee benefits. Or they can be used for general knowledge and motivation. Coaches make recommendations and offer personalized support that allows you to make steady progress toward your goals. They're typically paid per session or charge a flat rate for a series of consultations. Financial coaches might work with you in person, over the phone, by email or by a combination of these methods. Navigating the world of personal finance can be challenging and even a bit frustrating at times. It's important to make smart, objective financial decisions rather than emotional ones. And having the right financial advisor can help you do that. Word of mouth is a great way to find good advisors, so be sure to ask your co-workers, friends, and family for their recommendations. A final quick and dirty tip is that in many cases, when you have a significant life event, such as getting married or divorced, coping with the death of a spouse, having children, buying a home, buying or selling a business, receiving an inheritance, or changing careers, it's time to seek the help of financial advisors. If you're ready to make big changes in your financial life, find out more about working with me privately for financial life coaching at smartmoves2growrich.com. I'm glad you're listening. Chaching! That's all for now. Courtesy of Money Girl, your guide to our richer life. Imagine earning a degree that prepares you with real skills for the real world. Coppella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Coppella can make a difference in your life at coppella.edu. [BLANK_AUDIO]