Ep # 55 - Do I Need a Financial Planner? Or a Wealth Advisor? Yes, it's Confusing.
Are retirement planners worth it?
In the latest episode, Joe and Lindsay dive into the often-perplexing world of financial professionals and their designations. What is a retirement financial advisor? Financial advisor or planner? Investment advisor? Or wealth manager? How do you get the best financial advice for retirement?
The secret is to assess your financial goals and values before seeking an advisor. Find the right fit can offer services like holistic financial planning, investment management, and tax-saving strategies. By offering practical advice and clarifying the intricacies of each title, the hosts empower their audience to navigate the financial advisor landscape with confidence and make well-informed choices.
What You’ll Learn in Today’s Episode:
Title Confusion: The podcast explores the confusion surrounding various financial professional titles, such as financial advisors, financial planners, investment advisors, wealth managers, and life insurance advisors. The hosts emphasize that titles alone don't necessarily define an advisor's expertise or services.
Credentials and Designations: While certain designations like Certified Financial Planner (CFP) are recognized as indicators of expertise, the hosts caution that titles aren't always a guarantee of specialized services. They recommend understanding the specific credentials and qualifications of advisors to match their offerings with your financial needs.
Holistic Financial Planning: The hosts discuss the difference between advisors who primarily focus on investment management and those who offer comprehensive financial planning. They highlight the importance of finding an advisor who can provide a range of services, including tax strategies, estate planning, and retirement income planning.
Paying for Services: The podcast outlines different payment structures for advisors, such as percentage-based fees on managed assets, upfront charges for financial plans, or commissions from insurance product sales. It's essential to know how advisors get compensated and evaluate the potential conflicts of interest.
Selecting the Right Advisor: To choose the right financial advisor, the hosts suggest researching advisors' services, qualifications, and client profiles. It's recommended to interview multiple advisors, considering their range of offerings, compensation models, and compatibility with your financial journey.
Ideas Worth Sharing:
· "You need to understand what your goals are, what phase of life you're in, and what kind of services you're looking for. It’s finding a handful of advisors or planners that look like they might meet what you're looking for and starting to interview them."
· "So, for us, for example, if you call in and you want to work with us, but you're 35 years old with two young kids, then we're just not the right fit for you... You want to be clear on is: Does this advisor work with people like me? Do they offer all the services I need to have the most success financially?"
· We want to stress the importance of finding an advisor who can provide a range of services, including tax strategies, estate planning, and retirement income planning."
· "You want to call around, find out what advisors are offering the services you're actually looking for. And I can't emphasize enough knowing that if the only thing someone has to offer is investment management, then that's not a great value proposition because you can get that really cheap through sites like Wealthsimple and other robo advisors."
· “While titles matter, it's equally vital to understand the services each professional offers. We want to stress the importance of finding an advisor who can provide a range of services, including tax strategies, estate planning, and retirement income planning."
Resources in Today’s Episode:
retirementplanningsimplified.ca
Retirement Navigator – Our holistic retirement tool to help you get clear on your values and priorities in retirement.
WealthSimple – Website - Smart investing tools and personalized advice designed to build long-term wealth
Understanding Financial Professionals: Titles, Designations, and What They Really Do
Understanding the different titles and designations of financial professionals is a key aspect of securing your financial future. It's not just about handing over your hard-earned money to someone with a fancy title. It's about partnering with a competent professional who understands your unique financial needs, can provide you with personalized advice, and help you navigate through the complexities of financial planning. This knowledge can have a profound impact on your personal and professional life, equipping you with the confidence to make informed financial decisions.
Here are the questions answered in this blog post:
What does the title of a financial advisor really mean and what services can they provide?
How does the compensation structure for financial advisors, planners and insurance advisors work?
How can I understand my own financial goals and needs before seeking professional advice?
What potential conflicts of interest could arise from commission-based compensation in financial advising?
How can the retirement blueprint process offered by Matthews and Associates benefit potential clients?
1. What does the title of a financial advisor really mean and what services can they provide?
The title of a financial advisor may carry several meanings and cover a wide range of services, often causing confusion among individuals seeking financial guidance. In the broadest sense, a financial advisor is a professional who helps manage your finances, which can involve a multitude of tasks. These tasks might range from offering investment advice to creating a comprehensive savings plan. More specifically, they could include roles like a financial planner or wealth manager, each offering unique services. For instance, a wealth manager may primarily focus on managing wealth for high-net-worth individuals, while a financial planner might offer more comprehensive planning services that include preparation for retirement, tax planning, and strategic allocation of assets.
It’s critical to interview potential advisors, understand their services, and understand how those services align with your requirements. Every individual's financial journey is different, and therefore the choice of an advisor should be tailored to your unique needs. In essence, choosing a financial advisor should be personalized and should extend beyond just examining titles. Understanding the true meaning of a financial advisor's title and the services they provide is vital for numerous reasons. For one, it empowers individuals to make informed decisions about their financial future. Clarity in this realm allows for the selection of a professional who can align their offerings with the individual's financial goals and aspirations. Moreover, this knowledge can serve to demystify the often complex world of financial planning, making it more accessible for those seeking guidance. It allows individuals to take control of their financial health by ensuring they're getting the right advice and services tailored to their particular requirements. Therefore, paying attention to everything an advisor or planner brings to the table, rather than their title alone, is the key to finding the best fit for your financial planning needs and goals.
2. How does the compensation structure for financial advisors, planners, and insurance advisors work?
Understanding financial professionals' compensation structures is crucial in order to fully comprehend the services provided and the value of those services. This is not only about how much money changes hands, but about aligning expectations and responsibilities. A financial professional's compensation style can provide insight into their business practices, their approach to client relationships, and even their investment philosophies. For instance, advisors who work primarily on commission might have different motivations than those who charge a flat fee.
There are various compensation structures in the financial industry. They are most often paid as a percentage of the assets they manage. This means the more money you have invested with them, the higher their fee. Conversely, insurance advisors often earn a commission from selling insurance products. This has the potential to create a conflict of interest as there could be a temptation to recommend products that offer higher commissions. There are advisors that offer the option of an upfront fixed fee and commit to no specific products. This method can provide a sense of impartiality when it comes to product recommendations. Moreover, there are also advisors whose fee is based on a percentage but it varies depending on the product chosen. Being aware of these compensation structures is vital as it helps shed light on how the advice given by these professionals could potentially be influenced. It plays a significant role in choosing an advisor who aligns with your financial goals and personal situation.
The key is to remember that it's not merely about the cost but the value you receive in return. It's crucial to have an understanding of what you're paying for - be it financial guidance, portfolio management, or strategic planning. Understanding how financial advisors are paid is an essential factor when deciding who to work with. It allows you to better comprehend the kind of relationship you're engaging in and helps set expectations. Regardless of how an advisor gets paid, always remember to make sure that the services provided are in line with your financial goals. That's why it's crucial to openly discuss compensation structures with potential advisors and understand the value they bring. It's not just about the cheapest option, but rather about the value and suitability of an advisor's services to your specific needs.
3. How can I understand my own financial goals and needs before seeking professional advice?
Understanding your financial goals and needs before seeking a professional service could be likened to knowing where you want to go before asking for directions. It's about achieving clarity on your current financial position and your expectations for the future. This could involve identifying your long-term financial aspirations, understanding your risk tolerance, as well as assessing your investment capacities. It also entails pinpointing aspects of your financial life you are unsure of or feel you could use expert help with. It might even mean defining what wealth means to you, as this could vary among different people. Some people see wealth as having vast amounts of cash, while others see it as having ample time to spend with loved ones. By understanding your own goals and needs, you prepare yourself to engage more productively with financial professionals.
Many clients can benefit from the retirement blueprint process. This is a preliminary step that helps to outline exactly what the client might need from their services before making any financial commitments. From this interaction, the client will be in a better position to define their specific requirements and respond to the professional's queries with clarity. This, in turn, will enable the professional to offer tailored advice that matches the client's financial goals and needs, rather than packaging generic advice that may or may not be suitable. Understanding your financial goals and needs will ultimately determine the quality of service you receive. Why is understanding your goals and needs important? It’s because the quality of financial advice you receive will largely depend on how well you communicate your financial reality and your expectations. If the financial planner does not fully grasp your unique financial circumstances or your aspirations, they may not be able to allocate your resources in a way that best serves your interests. A common reason clients become unsatisfied with their advisors is that there's a disconnect between what they expect from the service and what is delivered. By having a clear understanding of your financial goals and needs before seeking professional advice, you not only ensure that you're more likely to receive services that cater to your unique financial circumstances, but you also empower yourself to hold the financial professional accountable. So, it’s not just about finding the right financial professional, but also about helping them to help you.
4. What potential conflicts of interest could arise from commission-based compensation in financial advising?
Commission-based compensation in financial advising can potentially create a conflict of interest. This is due to the significant influence it can have on the decisions advisors make with their client's investments. The fact that financial advisors might earn more from recommending certain products over others could potentially bias their advice. This can occur regardless of whether these products are in the best interest of the client or align with their financial goals and risk tolerance.
The most prevalent payment method in the investment world for advisors is based on a percentage of the assets they manage. Meanwhile, insurance advisors typically earn their profits from upfront commissions provided by insurance companies. This raises concerns about the compensation structure that could incentivize advisors to recommend specific products that offer higher commissions. To mitigate this potential bias, clients can opt to pay an upfront fee for a financial plan with no commitment to specific products. There is also the potential to structure fees based on a percentage, but vary it according to the particular product. Why does this matter? Well, financial advisors play a key role in shaping an individual's financial future. When you place your trust and finances in another's hands, you expect their guidance to be impartial and goal-oriented - directed solely by your best interest.
If an advisor is influenced more by their gain, it may lead to inferior advice or unsuitable products. Recognizing this potential conflict of interest in a commission-based compensation system can help you ask the right questions when choosing an advisor, ensuring that your financial interests remain the primary focus. This way, you'll secure an advisor whose ethics and values align with yours, ultimately leading to a mutually beneficial relationship based on trust and transparency.
5. How can the retirement blueprint process offered by Matthews and Associates benefit potential clients?
Choosing a financial professional can often be confounding due to the array of designations that exist. Delving into the confusing world of financial planners, a retirement blueprint process, embodies a clear representation of the services they provide, allowing potential clients to gauge and understand their modus operandi before any financial commitments. Their prime aim is to meticulously align the planning with the individual's goals and requirements. This involves more than just managing investments; it includes facets like estate planning, tax savings, and retirement strategies. It’s a more personalized approach. It means tailoring services to cater to clients' specific needs.
This preliminary step affords potential clients an opportunity to visualize their financial future and equips them to make an informed decision. It's akin to a mutual compatibility test, allowing both sides to assess the suitability of the proposed partnership. The importance of the retirement blueprint process lies not only in its ability to provide a preview of services to a prospective client but also in the empowerment it provides the client. It emphasizes the fact that a financial advisor's role extends beyond mere investment management. Holistic financial planning advice should include estate planning, tax savings, retirement income strategies, and more. This could redefine one's approach to financial planning, by ensuring they seek the right services, rather than settling for mere investment management.
Isn't it perplexing when you're trying to choose a financial professional, but you can't tell the difference between an 'investment advisor,' a 'wealth manager,' or a 'financial planner?'
It's like trying to navigate a maze without a map. Don’t just rely on labels but understand the services each professional can provide. This approach will help you align your financial needs with the right professional and illustrate a clearer path to your financial goals.