A financial advisor is a catch-all term used to describe a variety of professionals. Financial advisors can serve individual clients across the spectrum of wealth, businesses of all sizes, and even institutions and government bodies. There are literally dozens upon dozens of different types of advisors, each with their own specialties, skills, and expertise.
If you’re looking for the services of a financial advisor, where do you even begin your search? With so many choices, it’s easy to become paralyzed. How do you pick from such a wide range of professionals?
To find the right financial advisor, you’ll need to significantly narrow down the field. You’ll need to think about your own financial picture, what you’d like to accomplish by hiring an advisor, and understand the different types of financial advisors and what they do. That’s usually the first place to start.
Consider Your Financial Goals
Why do you seek the services of a financial advisor? Is it so you can begin building a nest egg for retirement? Or do you want to learn how to invest your money based on certain risk preferences? Or maybe you own a small business and need assistance on the multiple types of tax forms you need to file? All of these questions will have different answers depending on who is asked and each person may require a different type of financial advisor.
Before opening the web browser or mobile app, you’ll need to define your personal financial goals. This will aid you in finding the ideal advisor. If you need help calculating inventory taxes and equipment depreciation for your small business, you might need more specific expertise than a Certified Financial Planner™ (CFP®) can provide.
Ask yourself a number of questions about your financial goals in order to determine the type of advisor you should pursue. You don’t want to hire a financial professional that lacks the expertise or provides advice that doesn’t hold your best interests as a priority but you also don’t want to overpay for someone overqualified for your situation.
Understand the Different Types of Financial Advisors
The first thing to distinguish is fiduciary advisors from non-fiduciary advisors. Fiduciary advisors must follow a specific code of ethics when offering the best financial advice. Fiduciaries provide peace of mind. They must have extensive educational backgrounds and require loads of experience to earn their designation.
Fiduciary advisors must pass difficult exams and pledge to an ethical standard. This doesn’t mean you can sue them if your stocks lose money, but you are guaranteed to receive advice that is in your best interest. Your advisor won’t push you toward unnecessarily insurance policies or expensive investments just because they get a commission.
A non-fiduciary advisor is only held to a suitability standard, which states that investments and recommendations must be suitable for the client – they don’t necessarily need to be the best option, rather a suitable option at that time.
Some of the most common types of fiduciary advisors include:
● Certified Financial Planner™ (CFP®) – A CFP® mostly deals with individual clients and business owners looking to secure their family’s financial future. CFPs® hold a well-rounded skill set that includes investment management, retirement planning, tax planning, and estate planning. A CFP® is a fiduciary who is held to the industry’s highest ethical and educational standards. CFPs® will often have a personal touch when dealing with clients since they look to build lifelong relationships. Certified Financial Planners™: What You Need to Know
● Certified Public Accountants (CPAs) – A CPA has a little more education and experience than a CFP®, but they mostly work in business settings, helping clients with difficult tax and compliance issues. CPAs are most well-known for their tax preparation and filing capabilities.
● Chartered Financial Analysts (CFAs) – Often seen as the cream of the crop in investment advisor credentials, the CFA is difficult to attain and these advisors mainly deal with high net worth clients and institutional investors. CFAs are investment specialists with experience in asset allocation, portfolio management, and risk management.
Decide on the Level of Service You Need and What it Will Cost
By now, you should be able to at least determine whether you need a CPA, CFA, or CFP®. That’s a good start! But while most high-ranking advisor credentials carry a fiduciary responsibility, that doesn’t mean they all charge the same amount or offer the same service packages. Figuring out how your advisor gets paid is a good way to determine the level of service they provide.
Some advisors may charge an hourly fee, others take a certain percentage of your assets under management. Many advisors charge via the financial plan they distribute to their clients or they may have retainer services where they’re paid as they’re needed. What level of service do you need from your advisor?
Are you looking for a comprehensive plan or periodic advice? And how much can you afford to pay? You’ll need to decide what types of services make the most sense for you based on your financial needs (and your ability to pay).
What Utah Residents Should Know About Financial Advisors
Utah is a great state for retirees. There’s plenty of outdoor scenery to explore, affordable health care costs, and the rate of poverty amongst seniors is very low. But that doesn’t mean Utah residents can eschew the services of a fiduciary advisor.
Utah is friendly to retirees, but taxes can be a burden. For example, Utah taxes social security benefits – one of the only states in the nation to do so, although a 2021 tax credit is now available for social security benefits for certain Utah residents.
Additionally, sales taxes are above average (over 7%) and income tax is a flat 4.95%. Here’s one sigh of relief though – the state does not apply an additional estate or inheritance tax. Tax planning is a crucial part of any retirement plan, especially once you actually stop working and move to a fixed-income lifestyle.
If you’re a Utah resident looking for advice on taxes, retirement planning, or any other financial consideration, be sure to contact our office. Retirement isn’t a journey you want to take solo.
Certified Financial Planners™ at Advanced Retirement Strategies
Working with a Certified Financial Planner™ is an excellent investment of your time and money. With the high standards for CFP® certification, you’ll know you’re getting the expertise and knowledge of a highly-trained and educated professional who will always act in your best interests and with the loftiest ethical standards.
The team of retirement planners and investment advisors at Advanced Retirement Strategies in Bountiful, Utah includes two Certified Financial Planners™ who specialize in helping diligent savers with $250,000 or more of investment and retirement assets (not counting your primary residence) prepare for and then transition into retirement.
If you’re looking for a CFP® to help you live the retirement you have dreamed of, contact us today.