What is a financial advisor and do I need one?

Here’s where the rubber meets the road: Why would you get up every day and go to work to earn money just to spend it in the next 2-4 weeks, instead of creating a second income with it, buying a new home, car, tractor, or RV, starting a business, or whatever your dreams and goals are? A financial advisor’s job is to help you make smart money decisions so you can achieve your goals quicker.

In today’s society, it seems young adults have a harder time than ever to figure out the complexities of personal finance and making responsible decisions. It’s true, there is more information available to us at our fingertips, but there are equally enough scams that can be damaging to what could otherwise be a bright future. In this article, I will answer your common questions about financial advisors.
 
What does a financial advisor do?
Imagine if you could have someone to help you make sure you are budgeting correctly to not only have a comfortable living today, but also putting money away to grow your net worth and achieve your goals. Or to make sure you are on track for retirement and investing your money in appropriate investments with the most tax advantages. Or someone to help you craft a strategy to reduce debt the fastest. Or someone to call to review the latest business opportunity to invest in that you just heard about. These are all areas a financial advisor can help with.
 
But what about an accountant or a lawyer?
As you develop in your adult life, you need a team of professionals with your best interest in mind. Accountants and Lawyers sometimes can give financial advice, as long as it’s incidental to their profession. But if having an accountant and lawyer was enough, why is there an epidemic going across America of adults that know very little about personal finance or if they are on track for their goals?
 
I don’t want to be sold some investment or insurance policy...
There needs to be a distinction between a financial advisor and a registered representative or insurance agent. Sometimes called a “financial representative,” these professionals are usually hired by a broker/dealer or insurance company and earn their incomes through commissions. They give apparent free advice, because they are paid when the sale is made, per se. So therefore, in order for them to be paid for their advice it must be targeted for you to buy their investment or insurance product.
 
Contrast this to a financial advisor, where typically the relationship begins with a contract so each party knows what to expect from the other and a fee is charged. The financial advisor is therefore paid to give you financial advice that is in YOUR best interest, known as a fiduciary obligation, and not advice that will make a sale.
 
What should I consider in finding a financial advisor?
The first time you meet with a financial advisor, it needs to be similar to an interview for a business partner or your own chief financial officer. It should be a two-way interview where you determine if the advisor is someone you trust and want to work with long term, as well as the advisor determining if you would fit into their practice as a client. When we at JH Pierce first meet with new prospective clients, we need to make sure that you will be a good fit for us to work with. Here are some items we consider that can help you determine if you need a financial advisor.

• Do you have dreams and goals you want to achieve?
• Are you teachable/coachable?
• Are there measurable outcomes we can help you obtain to meet your dreams and goals?
• Do you have discretionary income (meaning your income exceeds your basic living expenses) or investable assets (I.e. retirement accounts, mutual funds, money market or CDs, or large cash savings)

In addition, Chris Hogan with Ramsey Solutions offers the following seven questions you should consider when finding a new advisor (taken from daveramsey.com).

• What do you love about your job?
• What services do you provide your clients?
• What is your investment philosophy?
• How will we communicate about my investments?
• How do you get paid?
• How ill you measure and evaluate my investment performance?
• Can you tell me why the last two clients you lost left you?

Where to start?
If any of this article has sparked questions for you, fill out the contact information on our website, and we will be in touch with you. We can sit down and discuss your questions and your situation to determine if you could benefit from working with a financial advisor. This meeting is just designed to determine if working together makes sense, so there is no charge for an introductory meeting. 

If you enjoyed this article, please leave us comments below or reach out to us with other topics you’d like to read about.
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Yours in wealth,
Josh Pierce