What to Consider When Choosing a Financial Professional
There are a few different titles that those in the financial industry traditionally market themselves under: financial advisor, financial planner, or wealth manager. While many financial professionals have a clear idea of what differentiates these three, the distinction has often been considered murky for consumers.
What is the difference in titles? Which financial professional do you need? What can we do for you?
In theory, a financial advisor offers investment management with a focus on the markets and securities. A financial planner manages your investments while also providing you with a broader financial plan to help you reach your goals, whether that be retirement, buying your first home, paying for college, etc. So a financial planner could serve as a financial advisor, but an advisor would not serve as a planner.
Then there are wealth managers who typically look at the big picture and provide a holistic approach to your finances. Wealth managers often provide investment management and financial planning in addition to tax reduction strategies, estate planning, insurance, and risk reduction, among other things. So a wealth manager could serve as a financial advisor and a financial planner, but not the other way around.
To top it all off, the title wealth advisor is also used to describe a professional who, in theory, provides the same holistic approach as a wealth manager and only differs in name.
“And this mess is so big, And so deep and so tall, We cannot pick it up. There is no way at all!” by Suess, The Cat in the Hat
Now, the key word used here is ‘in theory.’ On paper this all looks good and works but sadly, like a Dr. Suess book, it does not translate so easy to the real world. Due to a lack of regulation, all of these distinctions are no longer as simple and concrete as they once were.
A Rose by Any Other Name
The financial industry has turned the different professional titles into nothing more than a marketing tool, making it even more complex and confusing for you, the consumer. So you will find many financial advisors who do in fact provide planning and financial planners who provide a holistic approach. With the exception of industry certifications like a CERTIFIED FINANCIAL PLANNERTM (CFP®) or a Certified Private Wealth Advisor (CPWA) (more information on industry designations can be found here), titles generally will not help you narrow down your list of financial professionals.
So what is important to consider when choosing a financial professional?
The two most important factors, outside of the basic question of do you trust the person, is how much the financial professional charges and what the charges cover.
This is important because you want to make sure you are comparing apples to apples. Just like the different professional titles, the fees and how they are charged have become major marketing tools in the financial industry. We recommend asking a potential advisor to explain all fees and what exactly they cover. A 1% fee for managing your money is not the same as a 1% fee to manage your money in addition to providing milestone planning, tax consulting, risk reduction options, and estate planning. There are many hidden fees in our industry and be sure to avoid the fee trap: focusing solely on who has the lowest fees with little regard to service and performance. Is it better to have a lower fee if it also means a lower return and poor service? Knowing what fees are charged and what the fees include are the first and most important step when considering and comparing new financial professionals.
The next best thing to consider would be services offered by the professional and his or her firm. Unless you are solely seeking investment management, in which case we recommend you find an advisor who specializes and primarily focuses on such service, we recommend you find a wealth manager or wealth advisor that offers a holistic or comprehensive approach to your finances. You can benefit from such an approach by working with a wealth advisor to coordinate and unify the decisions in your life, so that those decisions complement each other and work to produce enhanced results.
A fragmented approach to finances allows for key components and information to be missed that would affect not only our approach to your finances, but also the outcome. This is inefficient, inconvenient and expensive for you, especially in the long run. It also lacks accountability and consistency. Instead, a holistic approach looks at the big picture to assess all the factors that affect your unique situation. By bringing all of the various pieces together, a wealth advisor can create a personalized, stress-tested plan that ensures you are confident in the potential of your financial future.
There Should Be a Good Fit
Due in part to the many different titles, fee structures, and services offered, choosing the right financial professional to work with can be difficult. Trusting someone with your money is trusting someone with your future. This is why we offer complimentary consultations so you can get to know our people, our process, and our office environment. To schedule this, you can fill out the contact form on the right side of this page or give us a call at (817) 717-3812.
We also provide more information in our Virtus View – a newsletter we send via email twice each month. For the latest investment insights, tips, and strategies to help you live your best financial life, you can sign up to receive this newsletter at the bottom of this page. In addition, past Virtus View articles can be read here on our blog.