Can We Simplify The Complexities That Surround Financial Advisors?


A financial advisor is simply someone hired to assist people regardless of their cash flow capacity with managing their money as far as making wise investments and placing funds into other types of accounts without detriment to their overall finances. 

The notion of handling money can be challenging for people regardless of their income level, and some are apprehensive about taking that challenge on their own. But the option of using financial advisors can be intimidating when you don’t fully understand the concept.

Before you employ an expert, it’s vital to seek out those who lend themselves to the ‘fiduciary rule,’ which merely means they work in following what would be the best interest of the client. 

It further means that the only compensation that the advisor earns will be the fees from the client as opposed to receiving a commission when an investment is made, or financial products are purchased.

Anyone has the potential for hiring an investment advisor, even those not classified in the ‘sophisticated investor’ category with funds in the millions to flash on the market. 

You might also consider using a ‘planner’ if you become overwhelmed to the point that you’re having difficulty finding your way out of massive debt, managing your business, maintaining multiple financial goals, or developing your retirement plan.

Either way, when the thought of handling finances brings ‘decision paralysis,’ the best option is expert advice. Further details into what these experts can do are offered at https://www.investopedia.com/terms/f/financial-advisor.asp.

Common Myths That Follow Financial Advisors 

When you take a leap of faith and put your money in the hands of a professional, there needs to go with that a sense of trust. Several misconceptions follow financial advising. If you lend yourself to these ‘theories,’ you place yourself in a certain position of risk in making your selections with those ideas as your basis. 

The more facts that are uncovered, the more prepared you will be to have your finances protected. Let’s look at a few of the most common misperceptions that make people hesitant to fully trust what is reality.

Myth:  You need to have a substantial cash flow in order to work with the experts.

It truly depends on the person with whom you choose to work. Some have more rigid specifications for which they specialize. But many are progressively evolving to engage in flexibly approached services for a varied clientele, many of whom may not have a lot of money. 

These are the ones you want to find when you have few funds but significant goals. They are the professionals we spoke of who are working with the clients’ best interests in mind. Follow for guidance on mistakes people make when they employ advising services.

Myth: ‘I won’t understand what they’re saying to me.’

Technically this is a perception that many people feel when they go to someone with far greater knowledge than they possess. Still, there are also genuinely some in the profession who don’t take the time to explain the terminology expecting people to understand merely because they do. It does happen in a lot of industries, such as with medical providers. 

Ideally, when you feel uncomfortable, you can either ask for a simplified explanation or, when that doesn’t work, find a more respectful replacement who offers patience and explains things more concisely. Ultimately, it’s your money, and if you don’t understand what the person is telling you, the risk for you can be substantial.

Myth: Using this type of service is only another way of investing in stocks, and that’s too much of a risk for an entire income.

Someone who is carefully guiding someone with their finances isn’t going to put all of their money into stocks. One of the key concepts for advising is to make sure that those who need assistance are shown how to develop sound savings that can be put to use in cases of emergencies or for significant purchases.

Following this aspect, the client can branch out into investments of other kinds such as stocks, but typically single stocks are not suggested as these deem relatively risky. For the most part, it is recommended that clientele employ a varied, balanced portfolio consisting of ETFs comprising many stocks/bonds and potentially mutual funds.

Myth:  Using someone local is critical because meetings should be handled personally due to the nature of the business.

Fortunately, in this day and age, technological advances with its security and safety devices implemented have allowed experts to handle their affairs privately with video conferencing. The digital era allows business to be conducted globally, meaning you’re not restricted to where your consultant has their practice. 

It also allows the freedom in your schedule to meet whenever it is most convenient for you and from wherever it is suitable.

Myth: ‘I don’t feel good about giving all my money to someone.’

The process doesn’t work that way, as you’ll never lose control over your money. The funds are generally placed in a ‘custodian’ or a financial institution that will hold an account with your name on it and the money for which you will have access online. The professional is there to offer suggestions and help to manage the funds. They are in no way ‘holding’ it as you ultimately will make the final decisions as to how the funds will be handled.

Hopefully, you understand that these are merely a few of the more common myths that consultants face. The reality is that an expert is concentrating on assisting you to better manage your financial situation for your greater good regardless of what that situation may be.

The hesitancy you may experience based on your developed perceptions may prevent you from what could be a beneficial turn of events with your personal finances.

What Are The Benefits You May See In Working With An Advisor

Switching gears away from those misconceptions you have and focusing more on the benefits that you can experience, you’ve already openly expressed the challenges you face in managing money. It takes a specific talent, and with the pace of the modern world, financial success requires this skill. 

In approaching a finance consultant to advise you, the professional will expect you to outline your specific needs and goals from which they will develop their comprehensive’ investment itinerary.’ 

This person can provide a vast range of advantages in organizing your monetary situation and prioritizing your income as much as possible. Some of those benefits include:

  • Developing A Plan And Set Doable Goals: Goals to work towards are essential, but they need to be realistic, or you could give up the effort. When you obtain help with your circumstances, your advisor will assist by outlining what should be milestones you hope to reach and specific timeframes to attempt to achieve them.  

You will work together in developing a ‘plan of attack’ to meet these deadlines. 

  • Knowledge Saves You Time And Effort:  For most people trying to understand the complexities of the investment world in order to be successful is intimidating, to say the least. It requires extensive research in learning how the market works but the basic terminology. With the chaos of work, family, household, there is little time for self-education.

When you invest in a knowledgeable person trained to manage your portfolio, one of the many stressful burdens of a hectic lifestyle is lifted from your shoulders so that you can focus more heavily on the other aspects. 

  • Money Creates Stress: Money or lack thereof is a source of high stress for people that often causes detrimental health effects such as heart disease, migraines, insomnia, and so much more. It’s critical for anyone who feels financially stressed to employ proactive methods to decrease the likelihood of health risks.

Passing your worries on to someone who can help you manage your funds can give you peace of mind. Those who work with an expert have a greater sense of confidence that they will be financially secure in their future and have the capacity to retire successfully.

  • Emotionally Invested: It’s challenging for people to remain objective in order to invest successfully. Emotions generally prevent them from staying on track when things start to go astray. Typically it’s difficult to realize when the line has been crossed, and you’ve lost the ability to reason.

A consultant advising you will develop a precise analysis as to the reason for their suggestions. Impartial perspectives are valuable for anyone, even those who may hold some knowledge in the investment world of their own.

An advisor can serve as the ultimate resource for someone who is not versed financially. This person’s core goal is to initiate an outline of milestones and develop a plan for you to use your income in accomplishing those efforts within a specific timeframe. 

A true professional that you would want to work with receives fees from their client and is satisfied with the fulfillment they get in achieving their task instead of gaining commissions from their clienteles’ investments. But there are those in the market to make money. You should be mindful of the cost involved with the person you hire. 

What Do Financial Advisors Charge?

Fees for services for each expert will be unique based on that person’s structure. It’s also essential to bear in mind that charges designated to one client may differ from another person dependent on the services the advisor renders and how that particular financial situation looks. 

In most cases, a flat fee is charged based on what is termed “assets under management,” which claims to range from one to two percent. Still, others opt to charge based on an hourly rate with additional fees for ‘add-ons.’ And some consultants will ask for commission.

  • “Assets Under Management”:  The term refers to the sum of money that the consultant manages for you, which is generally up to two percent. This can add up to quite a bit as an example shows these fees reducing gains on an investment nearly half over the course of a 25-year term.
  • Flat Rate: These professionals will initially let you know what the flat fee will be for the services you’re asking them to render at a flat rate of as much as $2,000. There is also the potential for being charged by the hour up to approximately $300 each hour with the disclaimer that if you need more services, there will be added on fees.
  • Charged Commissions: In some instances, commissions are taken on investments made on your behalf, including things like ETFs or mutual funds. The suggestion is that these types of advisors can be referred to as “resellers” in that they are pointing you towards particular goods and services for investment while they, in turn, will gain commission on that buy.

When researching for the appropriate person to hire, the crucial aspect is to ensure that you inquire about the total cost of any suggested plan or approach that is presented to you and then have it broken down for you.

Remember, there will be someone right for your budget and situation. If you don’t find the exact one the first time, continue down the path until you do. Never give up.

Final Word

You can initiate a search for assistance with your monetary issues at any point in time.

The recommendation is to consider guidance following significant changes in your life in particular. It could be milestones, such as starting your first real job, marrying, or buying your first home. All will impact you financially in a substantial way, and assistance on paving the way towards a stable future is wise.

That’s also true if your finances dramatically change wherein you receive a promotion or obtain an inheritance or even win the lottery. Some people find it all-to-easy to spend spontaneously.

The educated and immediate response should be to schedule an appointment to gain management perspective on the additional funds, so they benefit you in the long run and not burden you with regrets.

Much can be said positively for allowing a financial advisor to step into your monetary world. There may also be those who can find negativity. The main thing to ask in trying to make an intelligent decision is how confident you feel in your ability to plan for your future? 

Most of us would rather turn to where there is knowledge. Because where there is that knowledge, there is power. And with that power will come our success.

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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