Working in the financial services industry for as long as I have, and having cut my teeth as a financial advisor, I know there are plenty of ideas floating around about them, many of which are little more than myths. With that in mind, I’d like to “bust” some of the myths about financial advisors:
Financial advisors are only meant for wealthy people: Financial planning is meant to help people of all backgrounds achieve short-term and long-term financial goals. In fact, fee-based financial planners can assess your portfolio for just a few hundred dollars. These type of advisors also don’t take commissions for selling certain products.
Financial advisors are supposed to get you into high-performing investments: An investment strategy based around predicting “hot” or “cold” streaks most likely won’t succeed over the long term. Instead of that, financial advisors are meant to help clients focus on what they can control and guide them through the ups and downs of the markets while building a long-term plan.
Financial advisors mean you don’t have to know anything about investment: Investment can be a scary world, so it’s tempting to just sit back and let your advisor take care of everything. But don’t do that! The best thing you can do is educate yourself, which can help you understand what your advisor is doing with your money, and allow you to ask the tough questions that can help you get the most out of your advisor.
Financial advisors only focus on balance and performance: There’s more to finance than a portfolio. A good financial advisor will get to know their clients, and take a holistic view of their finances based around their goals, timeline, and comfort level with risk. Every client, clichéd as it sounds, is unique, with their own set of goals and needs.
Financial advisors only give you advice on investing: While picking the right investments is an essential aspect of personal finance, it isn’t the only part. Financial planning looks at every aspect of a person’s life: taxes, insurance, retirement, budgeting, liquidation, and everything in-between. It considers the various financial aspects of your life to develop a strategy and objective that can help them work together.
Financial advisors are only necessary for complex portfolios: You probably have multiple investment goals that will change over time. For example, if you’re newly married, you might want to save for your child’s college education. But 20 years later, you might be thinking about making tax-efficient withdrawals from your retirement savings. Your portfolio needs to keep pace with these changing demands.