6 Common Misconceptions About Financial Advisors

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All Advisors are the same and they’re all fiduciaries

A fiduciary financial advisor is someone that acts in the best interest of their clients when giving financial advice. There are three different types of financial advisors: brokers, fee-based advisors, and fee-only advisors. Brokers are licensed to buy and sell securities and receive commissions on those products they sell to their clients. The commissions brokers receive causes conflicts of interest and their clients may not be receiving advice in their best interest. Fee-based advisors often times charge fees and receive commissions depending on the situation. Fee-only advisors charge assets under management fees, hourly fees, or project based fees. Fee-only advisors are considered to be the most trustworthy for clients since they’re not receiving commissions on the products they sell. Fee-base advisors operate as a hybrid of both of the previous models mentioned.  For more on this topic read
"5 Terms You Should Know as an Investor: Part I."

Financial Planners only help people invest

Financial planners do much more than help people to invest. They help with estate planning, education expenses, succession planning, retirement planning, tax planning, and much more. Your financial advisor should treat your finances as a whole picture.

 Once I hire a financial planner, I don’t need to do anything

Once you’ve hired a financial advisor you should participate with him. A good advisor will help advice and coach you on important decisions that you need to make. You and your advisor are working towards financial security as a team.

Financial planning is a quick fix

A financial advisor can’t snap his fingers and make your financial health perfect. Planning is an ongoing process It might take time to plan and set goals for you and your family. Financial planning focuses on developing a holistic and long term plan to work towards your outlined goals.

Financial Advisors know what the market will do

No one knows how the market will perform. You can watch investment news all day and still get it wrong. Fiduciaries advice each client uniquely. They can’t know what the market will do but they can help keep their clients calm in all markets., focusing on your objectives and not the craziness reported in the financial media. 

Having more designations behind their name means their more reliable

There are many credibly established credentials within the financial industry. For example, in order to become a CFP you must pass a 14-hour CFP exam. However, in recent years the number of credentials has increased significantly. There are currently at least 95 different professional designations for financial advisors. The Wall Street Journal has found at least 115 others that aren’t tracked by FINRA. These credentials can be misleading to clients. Many are easy to obtain and require as little as a couple hundred dollars and a 30-minute course. This is something to keep in mind as you’re searching for a financial advisor.

If you found this information helpful, be sure to check out “Why should you hire a fee-only Financial Advisor?” and, if you have any questions, please feel free to contact us!

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