How Financial Advisors Can Help People Achieve Secure Financial Futures

Making smart financial decisions to secure one’s financial future can be challenging for some. It’s not always easy to manage a trust or inheritance or get started with retirement planning. Sometimes, it’s valuable to seek expert advice on rebounding from a financial misstep. This is where a financial advisor can help.

Financial advisors can provide guidance on money management and financial planning. However, according to Northwestern Mutual, only 38% of Americans work with one. There’s hesitation to enlist their help because of high fees, misconceptions and challenges about discussing money matters. Learn more about what financial advisors do, some of the benefits and drawbacks of hiring one and find information to help you get started.

A Northwestern Mutual study stated only 38% of Americans worked with financial advisors in 2021. That means the majority of them opt out of hiring or consulting with a financial advisor. There are a variety of reasons behind this, including common misconceptions that contribute to financial advisor biases.

Many Americans find it difficult to talk about their finances. Some even consider it taboo. While some turn to financial advisors for help, most choose not to. Here are some common reasons why some people do not hire a financial advisor.

When determining if a financial advisor is a good option for you, make sure you’re clear on what an advisor does and doesn’t do. Sometimes, people choose not to work with financial advisors because of common misconceptions. While it’s important to make careful decisions, these myths could skew your judgment. Know the truth and rely on facts, and by doing so, you’ll ensure you’re making informed and rational decisions.

As of 2021, only four in 10 Americans consulted with a financial advisor and 26% stated advisors are their most trusted source for money matters, according to the Northwestern Mutual study. A common reason is financial advisor anxiety, which refers to being concerned about the prospect of meeting with or talking to a financial advisor. Typically, those experiencing this fear judgment and shame for past financial decisions and behaviors. Therefore, it prevents them from seeking professional financial advice in the first place.

There are several actions that can be taken to help overcome this problem.

Generally, financial advisors guide their clients to make better financial decisions. But what does a financial advisor really do?

A financial advisor has multiple client responsibilities. While the main goal is to analyze and improve their client’s financial situation, they also provide professional advice for long-term financial plans. They need to continuously research financial markets, ensure responsible investing and effectively manage accounts and portfolios.

There are different types of financial advisors. Depending on your needs, the best type of advisor for you may vary. That’s because each type focuses on different services. There are also different types based on how they’re getting paid. These include commissions advisors, fee-based advisors, fee-only advisors and robo advisors.

Typically, commission financial advisors work for broker-dealers and rely on the product or service they sell. That means they get commissions based on what products or services they sell to manage the clients’ assets. This opens the possibility of having a conflict of interest.

So, choose a fiduciary who has a legal obligation to prioritize clients’ interests or an advisor who follows standards and laws to sell products based on clients’ needs and goals.

Individuals who want a fixed cost may find a fee-based financial advisor to be a good choice. These advisors charge a flat price for different services. You can choose to pay monthly, quarterly or annually. That said, these advisors may charge more. Additionally, they only offer advice. That means you will have to manage your financial portfolio.

Fee-based advisors are a combination of commission and fee-only advisors. They take a consultation fee, which is a fixed amount. It can be a flat retainer fee or an hourly rate. At the same time, they get commissions based on the products and services that they sell. That said, they’re also open to the risk of being biased.

Robo advisors rely on mathematical algorithms to come up with suitable financial advice, allocate assets and manage accounts. Usually, robo advisors require a fixed fee that may be paid monthly. There may also be management fees based on your portfolio.

Typically, robo advisors use online questionnaires to learn more about the client and their degree of risk aversion. While this option is typically more affordable, it involves minimal human intervention and may not be fully personalized.

There are different financial counseling services available. There are also financial planners and financial therapists.

A financial advisor refers to someone offering services to manage a client’s finances. A financial planner is a type of financial advisor that focuses on creating financial plans. Meanwhile, financial therapy is a combination of financial planning and emotional support.

Understanding the benefits and drawbacks of using a financial advisor can help you make the right decision based on your needs and circumstances.

Making well-informed financial decisions is important no matter your age. Financial literacy provides you with a basic understanding of vital concepts and principles. However, there are certain aspects that require more than basic knowledge.

That is where a financial advisor comes in. Financial advisors can help manage your money and plan your financial future to attain security. The table below shows the different services and specializations you can expect from a financial advisor.

Many Americans hesitate to use a financial advisor and manage their own finances. However, there are certain situations where expert help is necessary.

Hiring a financial advisor comes with many benefits. But there may also be possible drawbacks. That is why it’s important to ensure hiring one is the right decision for you.

Your financial advisor will serve as your partner in achieving financial security. However, for many, choosing a financial advisor can be challenging. By knowing what to look for, your considerations and individual factors, you can find the right advisor for your needs.

The resources below can help you better manage your finances. Find information on financial calculators, credit counseling, investing, retirement, and more.

• Consumers Cooperative FCU: Consumers Cooperative FCU has different channels and tools consumers can easily access, including financial calculators, tips against scams and money management resources.
• FINRA: FINRA serves as a guide for individuals who need help going through the investment process. It provides tools, such as calculators, to help you make financial decisions.
• National Foundation for Credit Counseling: NFCC is composed of different nonprofits. You can get in touch with NFCC Certified Financial Counselors to get started with financial planning or debt management.

• Consumer Financial Protection Bureau: The CFPB provides various resources related to finance. Find information about key terms and topics that can help you navigate financial challenges.
• Internal Revenue Service: The IRS provides information about gift taxes, relevant regulations and various related issues. You can also learn about tax-advantaged retirement plans and Individual Retirement Arrangements (IRAs).
• U.S. Department of Labor: This site provides consumer information on retirement plans. You can learn more about retirement benefits and coverage.
• U.S. Securities and Exchange Commission’s Investor.gov: It features tools and resources related to different investment products. You can also research investment professionals and plan managers.