Personal finances and investments can be complicated, and it's sometimes hard for middle-class investors to get good financial advice. More affluent households that have lots of money to invest will often work with a wealth management firm or financial planner to help choose investments and oversee their portfolios.
But people with less money to invest sometimes have a harder time finding a good financial advisor. Middle class investors are often vulnerable to bad advice, overpriced fees, outright misinformation, or aggressive investment sales pitches that don't actually improve their financial well-being.
Most people don't need a full-time financial advisor. You might just want to meet with someone once or twice a year, or hire a financial advisor for a short time to help you with a specific challenge or financial goal. Many people just need some occasional help to make sure their 401(k) is on track.
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Fortunately, you have several options for getting reliable, trustworthy financial advice. Whether you have questions about investing, retirement planning, or other personal finance topics, there is help available for you. Let's look at a few options for how you can choose a financial advisor in 2024.
Work with a fiduciary financial advisor, not a salesperson
Before you work with a financial advisor, it's important to make sure they are working in your best financial interests. You might want to work with a fee-only fiduciary advisor. "Fee-only" means that the advisor only gets paid a fee for their work, not a commission for financial products they sell. "Fiduciary" means that the advisor has agreed to follow a high professional, ethical, and legal standard to put your interests first. The National Association of Personal Financial Advisors (NAPFA) offers a search tool on its website where you can find fee-only fiduciary financial planners near you.
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What happens if you don't work with a fiduciary financial advisor? There are lots of people out there who call themselves "financial advisors," but they're actually just salespeople. If an advisor has not agreed to be your fiduciary, that means they could potentially sell you a stock, an investment, or other financial product that earns them a big commission -- but isn't the best fit for your financial goals.
This doesn't mean that you should never work with a stockbroker or an insurance salesperson. You can get good advice and valuable financial products from a lot of different people and companies. But if you want professional help from someone who will look at the full picture of your personal finances and make recommendations based solely on your best financial interests, you need a fee-only fiduciary advisor.
Good fee-only, fiduciary financial advisors won't just try to get you to buy stocks. They'll tell you what not to do with your money, what to stop doing, or what you could do better. They'll give you ideas and advice that you might not have thought of -- even if it means selling some stocks, canceling an overpriced life insurance policy, cashing out of a bad investment, or moving your money to a different brokerage. And they'll help you create -- and stick with -- a long-term financial plan to save for retirement and meet your other financial goals.
Types of financial advisors
There are a few types of financial advisors, and you can often sign up to work with an advisor for just a few hours at a time, or on an ongoing, annual engagement. Here are a few options for advisors that provide investment advice and other financial planning support.
Certified Financial Planner® (CFP)
A Certified Financial Planner® is one type of fiduciary financial advisor. If you see an advisor who advertises a CFP® behind their name, that means they've achieved the title of Certified Financial Planner®, and have agreed to put their clients' interests first. Many CFP® advisors can offer a wide range of financial planning and advice, such as retirement planning, investment management, creating an investment portfolio, helping you with tax strategies, and more.
Have you heard of executive coaches, business coaches, or life coaches? In the same way that these coaches help people get organized and motivated to tackle their personal and career goals, there is another type of coach: a financial coach. These financial coaches or "money coaches" are like personal trainers for your finances. Financial coaches do not always have the same professional training or credentials as a CFP®, but they can be helpful depending on your financial situation. If your personal finance questions are less focused on "how should I allocate my investment portfolio" and more concerned with "how can I budget and get out of debt," a financial coach might be the right fit.
Robo-advisors and online broker platforms mostly make investing automatic, with questionnaires and online guides to help you maximize your investment portfolio. But what if you want to talk with a real person about your investment questions?
Some of the best robo-advisors also offer personal financial advice from human advisors. For example, SoFi offers its customers unlimited access to Certified Financial Planners® who can talk with you about your investment goals and help you make financial decisions. Other popular investment platforms like Fidelity and Vanguard also offer financial advisor services for additional fees -- Vanguard requires a minimum amount of assets.
Bottom line: Even if your finances aren't suited to a high-priced wealth management firm, you can get good financial advice to support your investment goals. Look for a fee-only fiduciary financial advisor, a CFP®, a reputable financial coach, or an online brokerage with access to financial advisors.
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As someone deeply immersed in the world of personal finance and investments, I understand the complexities that middle-class investors often face when seeking reliable financial advice. The article you've shared highlights the challenges faced by individuals with less money to invest and emphasizes the importance of making informed decisions to improve financial well-being.
Firstly, the article rightly points out the vulnerability of middle-class investors to bad advice, overpriced fees, and misinformation. This vulnerability can lead to suboptimal investment decisions, impacting long-term financial goals. The piece suggests that not everyone needs a full-time financial advisor, but rather occasional guidance to ensure financial plans, such as 401(k) accounts, are on track.
Now, let's delve into the key concepts discussed in the article:
Working with a Fiduciary Financial Advisor: The article strongly recommends choosing a fiduciary financial advisor over a salesperson. A fiduciary is committed to high professional, ethical, and legal standards, putting the client's interests first. The National Association of Personal Financial Advisors (NAPFA) is mentioned as a resource for finding fee-only fiduciary financial planners, ensuring that advisors are compensated for their work rather than earning commissions on financial products.
Types of Financial Advisors: The article introduces various types of financial advisors, including Certified Financial Planner® (CFP), financial coaches, and robo-advisor platforms.
Certified Financial Planner® (CFP): CFPs are highlighted as fiduciary financial advisors who prioritize clients' interests. They offer a broad range of financial planning services, such as retirement planning, investment management, and tax strategies.
Financial Coach: The article draws an analogy between financial coaches and personal trainers for finances. While they may lack the same professional training as CFPs, financial coaches can be beneficial for individuals focusing on budgeting and debt management.
Robo-Advisor Platform: Robo-advisors and online broker platforms are discussed as tools that automate investing. Some, like SoFi, offer access to human advisors for personalized financial advice. The article mentions that even popular investment platforms like Fidelity and Vanguard provide financial advisor services for additional fees.
Choosing the Right Advisor: The article emphasizes the availability of good financial advice, even for those who may not require the services of high-priced wealth management firms. It encourages individuals to look for fee-only fiduciary financial advisors, CFPs, reputable financial coaches, or online brokerages with access to financial advisors.
In conclusion, the article provides valuable insights for middle-class investors on navigating the complexities of personal finances. Choosing the right financial advisor, understanding the fiduciary relationship, and exploring various advisory options are crucial steps in achieving financial goals.