Let us all agree on one thing; we need a bit of advice for EVERYTHING. Whether it’s your personal or professional life, we encounter situations where we find ourselves confused. We often look for an easy solution for everything; perhaps finding one isn’t easy as it seems. Hence, we depend on our friends, partners, or, very likely, ourselves to make all decisions.
What is the most critical aspect of our lives? It is our FINANCIAL STABILITY.
Managing our financial situation isn’t easy as it looks. But, unfortunately, we do fall under stress, and most of the time do not know where to begin.
In such situations, a financial advisor has your back!
DEFINITION
A trained financial expert who provides financial advice to their customers for compensation is called a ‘Financial advisor.’ They guide your financial expense, manage your taxes, and advise you on investment planning; get paid for the services they provide on a commission basis or yearly settlement, whichever is agreeable by the customer.
The term – ‘financial advisor’ fit under many categories. For example, their services may vary depending on their client’s requirements. Stockbrokers, tax preparers, investment planners and insurance agents all fall under the same list of financial advisors.
KEY UNDERSTANDING OF FINANCIAL ADVISORS
A financial advisor plans to advise you on balancing your expenses and income ratio. In addition, they act as advisors for your tax payments and motivate you on stock investments, insurance policies, estate planning and other investment strategies. Some of the key features of financial advisors are listed below:
• 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.
ARE THERE ANY BENEFITS OF HAVING A FINANCIAL ADVISOR
• A financial advisor creates a financial plan: To have a consistent balance on where and how much of your finances you really need to save, these are the terms under which your financial advisor charts out a plan for you, under the understanding of your current financial position.
• Comes from experience: Your financial advisor comes from a background of understanding the financial market, market potential, and ideas in which one can invest and grow financially. In addition, they undergo training and are qualified licensed professionals. Working with such expertise will be a great idea.
• Set a benchmark: To attain financial stability, one must have a plan. Set aims/goals that are measurable, achievable, realistic and precise. To achieve them, you need a combination of all these factors accumulated to support one idea. A financial advisor with their expertise helps you in creating a plan.
• Investment options: Once you have a plan, your financial advisor will guide you on investment options that contribute to your earnings. Using their expertise, they will help you choose the right investment platform that has minimum risk and can also match your financial stability.
• Keeps track of your finances: Your financial advisor keeps track of your expenses; conducts frequent checks to make sure you are not under any credibility. We may fail to keep track of our costs, and sometimes we are most likely not bothered. In such situations, a financial advisor will be beneficial.
• Revaluation of investment plan: Considering the market changes, an investment plan needs to be flexible and competitive. A financial advisor using their expertise, will make necessary changes to the current scenario in which you will be operating.
Revising a financial plan helps in being competitive in the market. You can choose an investment plan accordingly that is more profitable to you.
FUNCTION OF A FINANCIAL ADVISOR
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.
How do they operate? They analyse 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 maximising your revenue by making you invest in assets and long-term insurance policies.
ARE FINANCIAL ADVISORS EXPENSIVE
Financial advisors work under an agreement of the commission or yearly p.a. basis. Typically they charge for the services you expect from them. Usually, financial advisors charge 1% of the assets they motivate you to invest.
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.
