Getting advice from a professional like an advisor can help you plan for and reach your goals. Your advisor should listen to your goals and help you develop a unique strategy to achieve them.
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Why should you have a financial advisor?
Money plays an important role in our life, whether you are saving for a down payment on a home, your children’s education, or your retirement. For many big decisions, it is less stressful to consult with an expert than to do everything on your own.
There are many good reasons to work with an advisor when making financial decisions. Let’s look at three reasons for consulting a financial advisor:
1. You’re not sure how to manage your finances or investments
If you’re not sure how to choose investments that can help you reach your financial goals, you might want to work with an advisor. If you need advice on balancing spending and saving, or managing debt, an advisor with financial planning expertise can help. Some advisors may also be able to help you make decisions about insurance coverage, tax planning and estate planning.
2. You don’t have time to manage your investments
It’s possible you’ve been meaning to get help to manage your finances or investments, but just haven’t had time to do so. Or you’re overwhelmed and don’t know where to start. If so, you’re not alone.
If you don’t have time to actively monitor and manage your investments, you could choose to have an investment adviser do this for you.
3. You’re not interested in managing your investments
If you want to invest but don’t want to be involved in the day-to-day steps, working with an advisor may be right for you. Some investors choose to work with an investment advisor because they simply are not interested in managing their own investments.
What are the different types of financial advice providers?
There are several types of advisors to help you reach different goals. Remember that advisors may have their own fee structure.
Anyone selling investments or offering investment advice must be registered by a securities regulator unless they have an exemption. Make sure to always check before you invest, when you are considering working with an advisor.
People who provide financial advice include:
1. Customer service representative
You can often find this type of advisor at the financial institution where you have an account or loan. They usually help with one-time decisions, such as choosing a bank account or credit card. They can also help you compare loan or mortgage options and they may provide advice on short-term investment products such as GICs or different types of savings accounts.
Customer service representatives usually get a salary from the financial institution where they work. There’s no direct cost to you for their advice. However, you indirectly pay for their advice through your service fees or the cost of your investment. And these types of advisors can only recommend products sold by the financial institution they work for.
2. Personal banker
Personal bankers work at banks and trust companies. They’re trained to sell investments such as GICs and savings bonds. They may also be registered to sell mutual funds.
Personal bankers get a salary from the bank or trust company where they work. There is no direct cost to you for their services. But the cost is built into your service fees or the cost of your investment.
3. Mutual fund representative
Mutual fund representatives are registered to buy and sell mutual funds on your behalf. The companies they work for are registered as mutual fund dealers. Mutual fund representatives are usually paid by the companies whose products they sell. They make money every time they sell a fund. If you decide to buy, the cost is built into the cost of your funds.
4. Investment representative
Investment representatives (commonly known as stockbrokers) are registered to buy and sell a variety of investments on your behalf, such as stocks, bonds, mutual funds, ETFs and closed-end funds. The investment firms they work for (commonly known as brokerage firms) are registered as investment dealers. They make a commission when they buy and sell investments.
5. Investment advisor
This is an advisor who manages your investments for you and can provide investment advice on any type of security. They work for firms that are registered as portfolio managers. These firms can be independent or owned by banks. They may deal only with wealthy clients with at least $250,000 to invest. They may also charge a flat fee or an annual fee for their services based on the size of your portfolio.
6. Financial planner
A financial planner works with you to create a financial plan to help you reach your goals. They may advise you on a wide spectrum of financial planning including risk management, investment planning, tax planning, retirement planning and estate planning.
Financial planners can be paid in different ways. Be sure to ask your planner how they’re paid.
7. Insurance advisor
Insurance advisors are trained and licensed to give advice about insurance and sell it. Some specialize in certain products, such as property or life insurance. Others sell a range of insurance products. Some insurance advisors may also be registered to sell investments.
Insurance advisors are usually paid by the companies whose products they sell. They make money every time they sell a policy. If you decide to buy, the cost is built into your insurance payments.
There are a few things to consider about working with a financial advisor, including:
- Understand what you need from an advisor.
- Advisors can specialize in different financial products — choose one who fits your needs.
- Ask an advisor questions and check their qualifications before you work with them.
- Ask about their fee structure.
- You can change advisors as your financial needs change.