What is a financial advisor and do you need one? – Wealth of facets

Believe it or not, the financial services industry has approximately 200 professional titles.

Some have high standards or indicate specific expertise. For example, if you work with a professional who is a CERTIFIED FINANCIAL PLANNER™ or a Certified Public Accountant, you will learn a lot about their knowledge, expertise and code of ethics.

If you choose to work with others, such as a financial consultant or a financial coach, you will have much less certainty about what they are doing, their level of ethics, or their level of knowledge and expertise.

The reason is simple: some designations don’t make sense in the financial services industry and don’t have professional standards. For example, anyone can call themselves a financial coach or advisor with minimal qualifications (like a bachelor’s degree) and little or no financial experience.

This article describes some of the most common professional designations and questions to ask before working with a finance professional.

What is a Financial Advisor?

Some professionals use the term Financial Advisor as a generic description of what they do. However, this, as well as many other titles, is not recognized by a certification body. Therefore, anyone can use it to sound more believable than they could be.

However, “Chartered Financial Consultant (ChFC®)” and “CFP® professional” are two examples of professional designations that can only be used by advisors who have undergone rigorous training and testing. Both designations are granted by organizations with rigorous standards. This is why they are considered the gold standard in financial planning.

To better explain what we mean, let’s dig a little deeper. Here’s what goes into earning these designations and why they should interest you:

  • Professionals who hold either designation are legally considered trustees. By law, trustees must always put the interests of their clients before their own and only make recommendations that are best for the client.
  • Both designations require professionals to adhere to a strict code of ethics.
  • Both designations require planners to demonstrate a wide range of financial knowledge:
    • Investment management
    • retirement planning
    • Estate planning
    • Risk management and insurance
    • Taxes
    • Social advantages
    • psychology of money

Functionally, a CFP® professional and a ChFC® provide similar services: both must have some work experience and keep their certifications up to date through annual continuing education courses. They also differ from all other professional designations in significant ways.

What is the difference between a Financial Advisor, a Financial Advisor and a Certified Financial Planner?

So, if a CFP® professional and a ChFC® are the gold standard in financial planning, what do the others do? More than 200 professional titles mean?

Many highlight the specific purpose of a professional and are self-explanatory, such as:

  • Accredited Estate Planner
  • Certified College Financial Advisor
  • Registered Insurance Planner

But what does it mean to be Certified Bucket Plan? Or be a Chartered Financial Engineer? And will a Certified Estate Planner know more about estate planning than a CFP® professional or a ChFC®?

Because requirements and standards for professional credentials vary widely, other professionals may or may not be highly qualified in their listed areas of expertise. But, more importantly, there is a compelling reason to choose a financial advisor with broad knowledge and expertise rather than someone with a narrow specialty.

Why planning for your whole life is important

Financial planning should include all aspects of your life that money touches, not just one thing.

Financial decisions are not made in a vacuum; many involve significant decisions and trade-offs.

  • Should you set aside more for your children’s education or increase your 401(k) deductions?
  • Do you need life insurance, and if so, what type and how much?
  • Which debt should you pay off first?
  • Should you consider changing your benefits during the next open enrollment period?

These questions (and many more) need to be answered to complete your complete financial picture.

If you take a piecemeal approach, you will likely find it impossible to complete your puzzle. This is because everything your money touches is interconnected.

Ultimately, you don’t want someone to just advise you on your investments or your retirement and leave the rest to you.

Instead, you want a resource that can help you make important financial decisions, making sure those decisions align with the life you want to live.

If you’re ready to start thinking seriously about working with a financial planner, how do you choose one? You can start by asking yourself the right questions.

How to choose the right financial planner

Understanding the knowledge, expertise and experience of a planner is just the beginning.

You also want to know how they charge, what services they offer, and what to expect if you become a customer.

There are 10 important questions ask before choosing a financial planner. Here are some of the main ones:

  • Is there a minimum amount of assets required to work with you?
  • What tips are included?
  • Are there any hidden fees, add-ons, planner commissions, or product purchases required to work with you?
  • How much will I pay for your service annually, in dollars and not as a percentage?

Many planners require you to have a six or seven figure amount to invest.

Additionally, they usually charge a percentage of these assets (e.g. 1-1.5%) as a fee.

This means that if your investments increase in value, you will have to pay more, even if you do not get additional attention or services.

Some planners will only advise on investments they manage on your behalf. So if you want advice on your pension plan at work that they don’t manage, you might be out of luck.

Each Facet Wealth financial planner is a CFP® professional, supported by other in-house experts in everything from estate planning and equity compensation to military benefits and insurance.

All are fiduciaries, which means they put your interests first. None earn commissions or have anything to sell beyond their guidance, support and expertise.

Schedule a free introductory call today to learn more about how a Facet Wealth CFP® professional can help you make the decisions that will help you live the life you want to live.

Facet Wealth, Inc. is an SEC-registered investment adviser headquartered in Baltimore, Maryland. This is not an offer to sell securities or a solicitation of an offer to buy securities. It is not investment, financial, legal or tax advice. Past performance is no guarantee of future performance.