Hiring a professional expert to handle your money will ensure that you have a more planned approach towards saving for now and your future. However, before you can zero in on the professional that you want, it is necessary to understand the various available financial advisor designations. Here is a brief overview of the two most common financial advisor designations that you will hear in the market today – Financial planner and wealth manager.
Primarily, a wealth manager is differentiated from other types of financial advisors based on their payment options. They are usually fee-based whereas most other designations would allow a commission based or hourly fee plan. They are also allocated a small percentage of their client’s assets sometimes as the fees. You can find a wealth manager with directly working with RIA (Registered investment advisors) or even some trust companies. These professionals usually offer a wide range of consulting services, which include retirement plans, stock management and even mortgage handling.
The major pro for this type of professional is that the fee structure removes any sort of bias towards an investment plan or opportunity. However, the downside is that if the professional does not have a very strong code of professional ethics, they might get a little lazy since their payment structure allows for little risk of them being fired.
The financial planner will help you come up with a written financial plan. You can decide to execute the plan on your own if you do not want to continue with a professional or find you need just a direction but are very capable of handling your own finances. Usually the professionals under this designation will have the CFP (certified financial planners) or ChFC (Chartered financial consultant) certifications. However, many financial planners are now multifaceted professionals who have more than one certification. They might also be certified as a Personal finance specialist who can also handle your wealth management or execute their financial plan for you. In this case, the fee structure is segmented for the kinds of services you opt for.
The major pro of hiring a financial planner is that they are extremely unbiased regarding the advice they dole out in their plans. Since they are paid a fee for structuring a financial plan, they are often more likely to be chosen by less wealthy clients or professionals just starting to experiment with managing their finances. Since they are more multi faceted now, you can also hire planners to further work with you to better manage your current financial situation and grab future savings opportunities.
However, the downside might include that you do not get a more comprehensive approach towards investments especially if your planner does not specialize in handling retirement plans or stocks. Usually financial planners are working as individuals or in smaller firms so you might also find they do not have unlimited sources to execute a more detailed financial plan.
In conclusion, each individual has very different expectations from their financial advisors. However, it is important to research the professionals thoroughly and not just rely on their designation to understand their effectiveness for your financial management needs.