What Should You Know About Your Financial Advisor? | Erez Law

Money management advisors use many different terms to describe themselves. While some people use descriptive terms interchangeably, financial service providers offer different levels of customer care and support. Understanding what a professional can offer and his or her credentials will help you make an informed financial planning decision. Before you hire a financial advisor, here’s what you should know:

  1. Financial advisors, financial planners, and wealth managers may all offer roughly the same scope of services. Investment advisers differ. The first set of professionals must adhere to FINRA’s suitability rule, but they may or may not follow a higher fiduciary standard during the course of business. Financial advisors act as personal counselors. They may offer investment insights, tax planning services, and insurance services. A great advisor knows how to take a client’s short and long term goals and break them down into actionable steps. Wealth managers provide the same services, but they typically work with high net worth individuals and different types of investments and tax laws .Investment advisers, on the other hand, specialize in securities and must adhere to the suitability rule as well as a fiduciary standard while counseling clients. Use a professional’s job title to better understand the range of services and support you might receive from him or her.
  2. Fee structures vary. A financial advisor may charge clients a fee only or request an asset value commission. Fee-only arrangements include a flat retainer fee, hourly fee, project based flat fee, or asset percentage fee structures. Some advisors may use different arrangements for clients depending on the services they provide. If you work with an investment adviser, look for SEC regulated information. A copy of Form ADV Part II should offer a plain English explanation of the adviser’s obligations, services, fee structures, and other pertinent information.
  3. Financial management philosophies vary. Like attorneys, fit matters when it comes to choosing a financial advisor. Some professionals specialize in certain types of securities, while others focus more heavily on insurance, asset investment, and tax advice. Understand the type of financial support you expect from an advisor, your personal investment risk tolerance, and if you need specialized estate planning or succession planning services in addition to investment support. Look for an advisor who can demonstrate a personalized approach to asset and investment management. Talk to different financial advisors to determine fit before making a hiring decision.
  4. Credentials reveal education, ethics standards, and more. The number of acronyms listed after a person’s name may or may not indicate professional merit. Research and understand what it means for a professional to list CFP (certified financial planner), CPA (certified public accountant), or RIA (registered investment adviser). The level of education an advisor demonstrates may reveal the degree of education-backed insights, support, and ethical considerations an advisor uses to counsel clients.
  5. Some advisors may use hidden perks and biased predictions to make money. Constantly monitor advisor behaviors, recommendations, and fee structures. Forecasts do not offer guaranteed success, and some advisors receive commissions from their employers for pushing financial products. Read the fine print, and confront an advisor if you suspect ethical violations. In certain cases, you may have grounds for an investment fraud claim. Excessive account trading (churning), failing to diversify securities, and recommending unsuitable investments may indicate professional misconduct.

A financial advisor, planner, wealth manager, or investment adviser can provide invaluable insights into financial management and investment possibilities. However, clients should always enter a financial arrangement with all the facts. Research the candidate, talk to referrals, and search for ethics violations among professional associations. Continue to play an active role in your investment management arrangement to protect your assets and avoid preventable losses. Use these insights to find a financial advisor who offers the right level of support for your needs now and into the future.

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