admin on What is the Financial Advisor? What is a Financial Advisor?
Imagine you are sitting at the kitchen table and staring at a mountain of tax documents, investment statements, bills and other paperwork. As you try to make it all sense, your head is spinning. Here is where the financial advisor comes in, like a super hero with a briefcase rather than a cape.
What does a Financial Advisor do? Simply put, a financial advisor helps you manage your finances. This is just the beginning. They wear many hats. Imagine them as your Swiss Army knife of finance.
Financial advisors will guide you in everything from investing to retirement planning, and even budgeting. Like your personal GPS, they help you to navigate through the maze of decisions. Whether it’s planning for your retirement or buying a first home, they have you covered.
Imagine trying to build your own house without blueprints, or even tools. You would probably end up with a home that looks more like an abstract piece of art than a functional one. In the same way, managing your finances without expert guidance can be a disaster.
Let’s dig into the details. Financial advisors come in different forms: commission-based advisors and fee-based advisers (a mixture of the two). Fee-only advisers do not receive commissions for the products that they recommend. Commission-based advisers earn money from selling financial products, such as insurance or mutual funds. Fee-based advisers are compensated by both fees and commissions.
You get what you spend. It’s the same here. Fee-only advisors are more expensive initially, but their advice can be objective because they do not earn additional money by pushing specific products.
Many people wonder if these money mavens are really necessary. The answer to this question is not black and white. It all depends on your personal situation. Maybe you don’t require one at this time if you feel confident managing your investments.
Let’s face facts: most people aren’t watching CNBC and reading financial reports with their breakfast cereal. If you’re lost in terms like “asset allocating” or “diversification”, an advisor could be invaluable.
My friend told me that he hired an advisor when he received money from his aunt. The amount was not huge, but it was still a good chunk of cash. He didn’t have a clue about what to do. All he knew was that he put the money in his savings account, where it only earned peanuts.
The advisor helped him create an investment portfolio that was tailored to his needs (whoops! I mean customized to his goals – buying a home within five years, and setting up college funds for his children – and taught him along the way about risk tolerance.
What if we spent the same amount of time learning how to handle our money as we do other skills? Crickets are chirping…
The advisor can be a voice for reason in times of panic when the stock market is volatile.
Remember 2008, huh? Yeah… fun times! There were advisors there to help clients avoid rash decision driven by fear; they instead offered calm strategies that are based on data, rather than gut reaction (or hysteria).
Let’s not forget about taxes, the necessary evil we hate. Advisors minimize tax liabilities while maximizing returns, a feat worthy of Cirque du Soleil artists!
The best financial advisors simplify complicated issues into manageable steps, so that even the most financially-phobic people feel empowered instead of overwhelmed by their financial matters!
The next time you feel like you’re drowning in paper and wonder if there is any light at the end of the tunnel, consider calling someone who’s job revolves entirely around making dollars out of cents (pun intended).