There’s a really great article on the CNBC website that discusses the question of what financial advisors are. There is a lot of confusion because people use the term “financial advisor” for a group of people who are really different. There is less confusion in the medical field because we distinguish between various kinds of doctors. When you have a medical problem you distinguish between a pediatrician, a heart surgeon, a dentist or a psychiatrist. They’re all doctors but people know there’s a lot of difference between them.
The same thing is true of financial advisors. They could be a stock broker, an insurance salesman, or a Registered Investment Advisor (RIA).
Here is one important difference between brokers (technically known as Registered Representatives) who work for investment firms like Merrill Lynch, Wells Fargo, UBS or other major firms and investment advisors.
Brokers can only offer you investment advice that is incidental to them buying or selling financial products, whereas investment advisors are professionals who are paid by you to give you advice — advice that is in your best interest. The latter is called a fiduciary responsibility.
Before engaging an advisor, Ask yourself these key questions:
Are you looking for advice on individual stocks or someone to manage a diversified portfolio for you?
Are you looking for a product to solve a problem or a long-term financial plan?
Are your assets straightforward, or will you need more coordination because of complex estate-planning issues?
Are you an employee of a company, or might you be dealing with potentially complex tax issues, like selling your business?
Are your issues acute and immediate, or will they be ongoing or recurring?
How much do you want to rely on the recommendations of your advisor, or do you want to be the ultimate arbiter of what’s best for you, whether to follow a recommendation or not?
Are you prepared to evaluate each recommendation to determine whether it’s aligned with your needs?
These questions will help you determine what kind of financial advisor you need.
Feel free to contact us to answer some of your questions.
Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.