What exactly is a financial advisor, and does it offer a rewarding career? We will answer these questions and also demystify some of the commonly known misconceptions around the profession. For starters, did you know a financial advisor and a financial planner, are mostly doing the same job? Read on for a detailed description of the role.
Financial Planning Explained
Financial planning is the task of working out how best to achieve financial goals. Like with any good goal, financial goals also require the initial workload including research to make sure the goal is worthwhile and not just wishful thinking.
Financial planners aka financial advisors can speed up the process of reaching your goals, using their experience, asking the right questions to set achievable targets within timeframes, i.e. for when you need to rely on your investments and savings for an income. It may seem like a job anyone can do, but if the specific steps are not taken from the outset, and the financial data analyzed incorrectly, the actual planning stage is useless.
There is a saying: garbage in, garbage out (GIGO), inferring poor quality in, bad quality out. So it’s vital to get the accurate analysis of a financial position and then work with it to create a financial plan that will provide certainty.
For example, it’s risky for most of us, to jump headfirst into saving for retirement without clear goals of what we need to accumulate to live on for our own specific lifestyle.
Professional financial advisors live and breath financial data and wealth planning strategies. It’s an exciting role for number crunchers, and there’s a real sense of achievement plan for managing wealth, and saving for retirement exceeds a client’s expectations.
An advisor doesn’t merely point their clients’ in the right direction, they also act as financial educators, sharing knowledge and imparting habits that can improve the health of cash flow and wealth accumulation to meet long-term financial goals.
Investments and Portfolios
Financial advisors are not all the same. You can decide to specialize, e.g. become an expert in retirement plans or investments and share portfolio management.
The good news it’s a role that you can make your own depending on what really interests and motivates you. Start out by finding out all you can about what the business entails and then do your own research by going online and visiting local operators. For example, you could search on the keywords “financial advisor in Austin” and locate financial advisors in the area that are specialists in say stocks portfolios or property investment versus the advisors that offer more generic savings strategies.
Ongoing Financial Management
Financial advisory is not usually transactional. Long-standing relationships form as you manage the portfolios of customers throughout the years.
Advisors will engage with their clients at least a few times per year to discuss their position and portfolio.
Life has a way of throwing up curveballs, and it is at this time, significant financial or life changes, or any new financial goals need to be communicated, and plans tweaked and changed as required. These changes could be anything from marriage to divorce, a child’s birth, spouse’s death, buying or selling a home, getting a new job (or being laid off).
What Don’t Advisors Do?
Financials Advisors can assist but don’t usually deal with horrible debt situations, including bankruptcy. An advisor is educated in wealth management as well as financial planning, not debt relief.
There is some flexibility in remuneration; however, financial planners are regulated, so disclosure statements must be given to clients before services rendered. Typically advisors will work on an hourly rate, or for a percentage fee. A percentage fee is based on (usually around 1%) a percentage of the assets under management. Advisors also usually paid on commission for any financial products they sell. Caveat emptor: make sure you abide by the rules and laws in your area which govern financial advisory services.
What’s A Robo-Advisor?
Just so you know humans are not the only operators in the profession. Robo-advisors are a cost-effective alternative to the traditional financial advisor. Although as a customer what, you’ll be lacking in human interaction and personalization, your Robo-advisor will make up for in charging you less for digitally managing your assets.
Robo-advisors can’t have conversations on best financial products or how to best meet a client’s goals, so human advisors still have the upper hand.