To say that financial planning and asset management can be confusing to the uninitiated is a gross understatement. Asset funds and market instruments are confounding in their complexity, so most people turn to professional help. If you are in this situation, read on for answers to the most common beginner’s questions about finance.
How Do I Know When I Should Hire A Financial Advisor?
It differs person to person. The main factors to consider are your understanding of personal finance and your expectations for growing your wealth. At a certain point in life, people accumulate enough wealth that they want to protect it from inflation and have it generate interest and dividends beyond what a savings account can offer. It is always good to improve your understanding of personal finances, but researching all the types of funds and assets available will exhaust someone who is focusing on a career. When your needs exceed the time and energy you are willing to put into wealth management, it is time to consider hiring a professional.
How Do Financial Advisers Assess Fees?
Financial advisers usually don’t charge clients directly for advice. Rather, the standard model has been for them to take payments from the companies whose financial products they are selling. This creates an incentive for them to push the products of whichever companies they have agreements with or pay them more, and not necessarily which ones are best for the client. Today, more financial advisers are starting to charge clients either a flat fee, or a yearly percentage of total assets. Although this can be more expensive in the short term, in the long run you will be better served by having an adviser who works for you.
What Is a Fiduciary?
In asset management, a fiduciary is a financial planner whose highest stated objective is protecting the client’s financial interests. When managing another person’s assets, they must adhere to higher ethical guidelines than non fiduciary planners, who tend to act as salesmen. You should always choose an adviser who is classified as a fiduciary.
When selecting a financial adviser, always check their past history for consumer complaints. Online review systems are getting better, and offer a good starting point to find the best financial planning professionals serving your area.