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Working with a Financial Advisor: Is it For You?

Financial advice

The phrase “financial advisor” might conjure up a pretty distinct image in your mind: a person in a suit who works pretty much exclusively with the 1 percent. In reality though, there are many types of financial advisors, some of whom will only handle clients with loads of money, and others who are happy to work with people who are more squarely in the middle class. Working with a financial advisor can be about more than finding someone to give you investment tips. An advisor can be a tax professional, broker, or insurance professional, amongst other things, and his or her goal is often to help you make the most sense of your money and to lay out a plan for a bright financial future.

What an Advisor Can Do

What a financial advisor can do depends in large part on what you need. In some cases, in a way that’s similar to credit counseling, working with a financial advisor can be what you need to help get a clear sense of your financial status and health and to get on the road to putting together a budget that works for you. An advisor can also help you when it comes to planning for retirement or when it comes to figuring out what to do with a considerable sum of money, such as funds you’ve had in a savings account for years or a large inheritance you might have received.

You might consider working with a financial advisor if you’ve recently had a major life change or if you’re about to have a major change. For example, your financial needs change if you get divorced or lose your spouse, or if you get married. Having a child can also change your financial needs. You might want help figuring out how you’ll save for your child’s education, for example, or, in the case of divorce, how you’ll make ends meet and plan for retirement on one income, not two.

What to Look For

There are a few things to look for when choosing a financial advisor or planner. One is how the person is licensed or certified and the other is how the planner is paid. It’s often in your best interests to look for a financial advisor who is a Certified Financial Planner (CFP). A financial advisor needs to meet four requirements before he or she can earn the CFP designation. First, he or she needs to pass an examination, which features questions on a variety of financial topics. A CFP also needs to have at least three years of financial planning experience before using the designation, and he or she needs to complete a certain number of continuing education credits every few years to maintain the designation, according to the Financial Planning Association of Massachusetts. Finally, and most importantly, a CFP needs to uphold a code of ethics, and needs to agree to act as a fiduciary --meaning the advice he or she gives you must be in your best interests.

Some advisors charge a set fee for services, meaning you’ll pay them the same amount no matter what. Others work on commission, meaning they earn a cut of any investments they sell you. It’s usually best to work with a fee-based planner, as you’ll know that the person has no financial interest in recommending a particular investment or service to you.

It doesn’t matter what your current financial picture looks like. If you’re ready to start planning for the future, working with a financial advisor can be a great idea.

Image Source: Flickr

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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.


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