The word ‘advice’ rings bells in our ears. This has possibly been a word that we often here in our daily life; might be from our folks, friends or even colleagues that we work with. Not everything in life is easy, but with one good advice, one may completely change their life.
In this article you will be referring to definition and facts of a financial advisor. Finance, as we all know can possibly be a solution to anything. It is an element of comfort, satisfaction, and security to you and your loved ones.
DEFINATION OF FINANCIAL ADVISOR
A financial advisor is a person that comes from a field of expertise of financial studies, who is trained and holds a license to provide financial guidance and help to their clients. They manage your tax payments, understand your current financial stability, and using their experience they chart a financial plan; focusing on minimizing your tax payment, increase your revenue by motivating you to invest on assets and insurance policies.
HOW DO FINANCIAL ADVISORS OPERATE
They analyses your current financial situation, understand your requirement and future goal related to your financial position, and chart a systematic and effective financial plan that will allow you to achieve your primary objectives. They act as your guide; primarily, they will focus on reducing the burden of taxes and maximizing your revenue by making you invest in assets and long-term insurance policies.
Financial advisors are inclined towards planning and managing your economic life. They create a suitable financial plan that allows you to safeguard your earnings for the long run. Create investment opportunities and guide you to earn revenue through different modes of investment.
Financial advisors provide advice on their client’s financial investments, personal financial goals, and decision-making and guide their clients on good ideas for investment.
Financial advisors are licensed after they have completed one or more exams and obtain designated knowledge and expertise on the manner of financial advice.
Financial advisors work on a commission or per annum payment basis, whichever is agreeable between the parties. They may also expect a commission on returns earned by their clients from the investment plan they had recommended.
Compared with stock brokers, financial advisors provide guidance and make careful decisions on behalf of their clients for any investments.
NOW; comes the biggest question:
WHY DO THEY CHARGE?
In order to understand the importance of having a financial advisor working for us, we need to notice that they dedicate their time and effort in helping you achieve your financial stability. They provide guidance from their field of expertise and chart out an effective plan that will best suit your current financial state. They work on either commission basis, or one time yearly p.a. payments; however, both seem reasonable.
Using investment plans, they help you generate revenue, which contributes positively towards your finances.
For example: Expecting a 1% commission for the revenue you make which could be an average of 10% to 12% form an investment, charging 1% commission is hardly debatable.
A financial advisor that has a reputation of making his clients earn money, will contribute in a similar manner and help lift over the burden of financial crisis. If you share an experience of working with a financial advisor already then you could speculate the position of your finances now vs. then.
If you haven’t worked with one yet, and fee structure would be a concern, it is wise to first understand your goals. A certain percentage of your revenue is going out as a fee to someone who is working as your finance manager, is far more settling than managing your finances without an idea of expertise. If your goals include minimum financial stability, then you may work with an advisor that charges on hourly basis.
Let’s split financial advisors under three payment categories:
Commission-based: Financial advisors typically advise you on investment options like insurance policies, stock or the purchase of any asset. Revenue earned through any of these investments will also be an earning towards a financial advisor. Therefore, they will charge a certain commission percentage from the return on investment. However, there are other methods that you can go about that do not include commission earnings.
Project-based earning: For example: When we hire a lawyer, they work with us for a specific amount of time until the case is closed, with a minimum fee agreed upon by both parties. Similarly, financial advisors also work on project-based payments.
Fee-based advice: The fee-based financial advisors can charge a percentage of fees earned from the revenue from the assets invested. The advantage of working with such advisors has they in ongoing access. Once you sign them under this agreement, they do not limit you to reach out to them whenever you wish to. Such an agreement is a long-term based agreement, and you will not have to worry about being charged extra each time you access them.
ARE FINANCIAL ADVISORS WORTH THE MONEY?
Management is a skillful act. You may be a good manager at work, but possibly struggle to balance your debits vs. credit. If you’re finding a hard time to control your finances then you may need a hand. Once you bring one on board, you will see a significant development and have a calculative approach towards how you use your money.
However, if you are in a stabled situation with no debts to be paid, less monthly expenses to incur, and already have a firm financial plan of your own, then you may not need an expert advice.
Finding a financial advisor that shares your values and perspective about money is crucial if you decide to work with one. For instance, if you aspire to be an ethical investor, you should choose a financial advisor who is knowledgeable about ethical investing and who can customize your portfolio to meet your needs. Additionally, you ought to deal with a financial counsellor who won’t pressure you to achieve your financial objectives more quickly than you feel ready.
In the end, your particular situation and the financial counsellor you decide to work with will give you an understanding if financial advisor are worth your money.
BOTTOM LINE
Think about the expected return on your investment when comparing an advisor’s fees. Inquire as to whether an advisor is fee-based or fee-only. Any advisor who withholds information about fees should be questioned. Review the annual costs you pay and contrast them with the services you get. That may show whether you still click with your advisor. Comparing your advisor’s rates to those of other professionals who provide comparable services can also be helpful.
