As the profession has evolved over the past 40 years, different types of advisors have emerged with different practice emphasis or specialties. Different compensation methods have also emerged making it important to look for an advisor with an understanding of the differences.
Are you saving for retirement? If so, look for a Certified Financial Planner™ or other financial advisor who offers comprehensive financial planning. Comprehensive financial planning is not merely about the return, it is also about tax and risk management and helping you create the future you want. Your advisor can help you with long-range planning designed to help you build and preserve your savings.
If you are mostly interested in a strategy that anticipates market changes and pro-actively adjusts your portfolio, you may want an advisor who offers active money management featuring tactical asset allocations. Tactical asset allocation seeks to continually fine-tune portfolios in light of valuation and economic factors. The goal with active portfolio management is to take advantage of the better-performing arts of the market.
Are you just seeking a basic financial strategy? If you are just looking for a one-time financial plan, consider a Certified Financial Planner™ who can offer a “blueprint” along with a hand in implementing and carrying out the plan over time.
If you are looking for a “quarterback” to help you manage your financial life, a wealth management firm may be what you are looking for. Typically, this type of firm unites several specialists in investment management, retirement planning, estate planning and insurance, along with a network of other professionals they can refer to as needed. In a team effort, they draw on their collective knowledge and abilities to design personalized, long-range strategies for each client.
Today, many financial advisors have fee-based practices and some only charge fees. In working for fees only, a financial advisor is telling you that his or her business is built on advice and objectivity, not product sales. Some advisors are still largely paid by commission and others through a mix of fees and commissions. Keep in mind that if you want an advisor who can offer you insurance products, commissions will be part of the relationship.
Finally, take your time as you search for the right advisor. Many people hire the first financial advisor they meet. Shop around until you find an advisor who makes you feel comfortable that your finances are in their hands.