5 Things You Didn't Know a Fee-Only Financial Advisor Does
When it comes to working with a financial advisor, you may not know where to start. There are many different types of financial professionals out there who can help you with any range of financial needs you may have, but fee-only financial advisors can occupy an important role in people’s financial lives.
Tax preparation is generally handled by a Certified Public Accountant. Insurance can be purchased directly with an insurer or through a broker. But what about overall financial planning and management?
Many families start feeling the need to work with a financial advisor once they hit their stride in their careers, have children, and are within 10 to 25 years of retirement. The need to know you’re making the right decisions with your money becomes more critical, especially to ensure there is enough money to cover everyday expenses today and a certain quality of life in the future.
Here are five important things most everyday people don’t realize a fee-only financial advisor does.
1. Fee-Only Financial Advisors Provide Financial Planning
“Do I need a financial plan?” This is a question people wonder about because traditionally the financial services industry made financial planning and wealth management seem exclusive to “rich” people. You had to have a certain amount of money saved up already before you would even be considered as a client. Under this construct, everyday working Americans were led to believe that they didn’t need a financial plan since they were excluded from the offering.
Fast forward to today and you have fee-only financial advisors like myself who provide financial planning services without minimum asset requirements. Financial planning is now more widely offered as a standalone service or with investment management services. The value of having a financial plan is that it offers you a complete audit of your financial life, assesses your current financial reality, and details a step-by-step action plan you can take that has the ability to improve your financial future.
2. Fee-Only Financial Advisors Manage Investments
Fee-only financial advisors don’t just provide financial planning, we can also manage your investments. If you have never worked with a financial advisor before, you might think you have to manage your investments on your own or go to an investment broker. What you may have not realized is that fee-only financial advisors manage investments as well.
Even if you have an employer-sponsored retirement plan or you are participating in a state or federal retirement system, a fee-only financial advisor can still help advise you on investments they don’t manage. A fee-only financial advisor will also advise you on other investment accounts you can open that they can manage in addition to your employer-sponsored retirement plans.
3. Fee-Only Financial Advisors Offer Objective Advice without Conflicts
A fee-only financial advisor’s compensation structure and how we are regulated by the SEC eliminates most conflicts of interests. We are paid for our service. We do not earn commissions on financial products or investments we recommend.
Because we are fee-only is why we are uniquely qualified to advise on your entire financial life, not just certain aspects of it. The fee-only compensation structure can range from fees on services we provide like financial planning to earning a percentage of the assets we manage on a client’s behalf. There is no single way a fee-only financial is compensated, so be sure to ask if you have any questions.
4. Fee-Only Financial Advisors Consider Your Entire Financial Life
As I mentioned previously, a fee-only financial advisor doesn’t just look at one aspect of your financial life like a specific investment, insurance coverages, or your taxes. A fee-only financial advisor considers all of it. In this way, you have something akin to a chief financial officer for your personal finances!
We are highly trained to look for and spot vulnerabilities in your financial life as well as opportunities appropriate for you and your family. Many of my clients, for example, just want to know they are doing “all the right things” so they don’t miss an opportunity or make a decision that could unknowingly impact their financial security. As a fee-only financial advisor, I know that everything is connected from your income to your taxes, retirement planning, education planning, and business or career decisions.
Having a financial professional on your team who understands how everything can work together to align with your vision for your life and goals for your future is something that can provide financial confidence and clarity for families.
5. Fee-Only Financial Advisors Coordinate with Your Other Financial Professionals
Lastly, fee-only financial advisors tend to coordinate with your other financial professionals like your CPA, attorney, and insurance brokers. This level of involvement in your financial life can help make sure that every aspect of your financial life is harmonized and aligned with your values and goals. It also takes the guesswork out of making sure you have all your bases covered like tax planning, adequate insurance coverage at the best rates, and that your attorney has the information he or she may need to negotiate other financial matters on your behalf.
In short, fee-only financial advisors do way more than most people probably realize. If you have questions about what working with a fee-only financial advisor would look like for you, please don’t hesitate to reach out to me at Afton Advisors.