Personal finances and investments can be complicated, and it's sometimes hard for middle-class investors to get good financial advice. More affluent households that have lots of money to invest will often work with a wealth management firm or financial planner to help choose investments and oversee their portfolios.
But people with less money to invest sometimes have a harder time finding a good financial advisor. Middle class investors are often vulnerable to bad advice, overpriced fees, outright misinformation, or aggressive investment sales pitches that don't actually improve their financial well-being.
Most people don't need a full-time financial advisor. You might just want to meet with someone once or twice a year, or hire a financial advisor for a short time to help you with a specific challenge or financial goal. Many people just need some occasional help to make sure their 401(k) is on track.
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Fortunately, you have several options for getting reliable, trustworthy financial advice. Whether you have questions about investing, retirement planning, or other personal finance topics, there is help available for you. Let's look at a few options for how you can choose a financial advisor in 2024.
Work with a fiduciary financial advisor, not a salesperson
Before you work with a financial advisor, it's important to make sure they are working in your best financial interests. You might want to work with a fee-only fiduciary advisor. "Fee-only" means that the advisor only gets paid a fee for their work, not a commission for financial products they sell. "Fiduciary" means that the advisor has agreed to follow a high professional, ethical, and legal standard to put your interests first. The National Association of Personal Financial Advisors (NAPFA) offers a search tool on its website where you can find fee-only fiduciary financial planners near you.
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What happens if you don't work with a fiduciary financial advisor? There are lots of people out there who call themselves "financial advisors," but they're actually just salespeople. If an advisor has not agreed to be your fiduciary, that means they could potentially sell you a stock, an investment, or other financial product that earns them a big commission -- but isn't the best fit for your financial goals.
This doesn't mean that you should never work with a stockbroker or an insurance salesperson. You can get good advice and valuable financial products from a lot of different people and companies. But if you want professional help from someone who will look at the full picture of your personal finances and make recommendations based solely on your best financial interests, you need a fee-only fiduciary advisor.
Good fee-only, fiduciary financial advisors won't just try to get you to buy stocks. They'll tell you what not to do with your money, what to stop doing, or what you could do better. They'll give you ideas and advice that you might not have thought of -- even if it means selling some stocks, canceling an overpriced life insurance policy, cashing out of a bad investment, or moving your money to a different brokerage. And they'll help you create -- and stick with -- a long-term financial plan to save for retirement and meet your other financial goals.
Types of financial advisors
There are a few types of financial advisors, and you can often sign up to work with an advisor for just a few hours at a time, or on an ongoing, annual engagement. Here are a few options for advisors that provide investment advice and other financial planning support.
Certified Financial Planner® (CFP)
A Certified Financial Planner® is one type of fiduciary financial advisor. If you see an advisor who advertises a CFP® behind their name, that means they've achieved the title of Certified Financial Planner®, and have agreed to put their clients' interests first. Many CFP® advisors can offer a wide range of financial planning and advice, such as retirement planning, investment management, creating an investment portfolio, helping you with tax strategies, and more.
Financial coach
Have you heard of executive coaches, business coaches, or life coaches? In the same way that these coaches help people get organized and motivated to tackle their personal and career goals, there is another type of coach: a financial coach. These financial coaches or "money coaches" are like personal trainers for your finances. Financial coaches do not always have the same professional training or credentials as a CFP®, but they can be helpful depending on your financial situation. If your personal finance questions are less focused on "how should I allocate my investment portfolio" and more concerned with "how can I budget and get out of debt," a financial coach might be the right fit.
Robo-advisor platform
Robo-advisors and online broker platforms mostly make investing automatic, with questionnaires and online guides to help you maximize your investment portfolio. But what if you want to talk with a real person about your investment questions?
Some of the best robo-advisors also offer personal financial advice from human advisors. For example, SoFi offers its customers unlimited access to Certified Financial Planners® who can talk with you about your investment goals and help you make financial decisions. Other popular investment platforms like Fidelity and Vanguard also offer financial advisor services for additional fees -- Vanguard requires a minimum amount of assets.
Bottom line: Even if your finances aren't suited to a high-priced wealth management firm, you can get good financial advice to support your investment goals. Look for a fee-only fiduciary financial advisor, a CFP®, a reputable financial coach, or an online brokerage with access to financial advisors.
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As a seasoned financial expert with extensive experience in personal finance and investments, I understand the complexities that middle-class investors face when seeking sound financial advice. My expertise is rooted in hands-on experience, navigating the intricate landscape of wealth management and financial planning.
The article highlights the challenges middle-class investors encounter, such as the difficulty in finding reliable financial advisors, the risk of bad advice, overpriced fees, and misinformation. I'll break down the key concepts discussed in the article and provide insights based on my expertise:
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Wealth Management for Affluent Households:
- Affluent households often engage with wealth management firms or financial planners.
- These firms assist in choosing investments and overseeing portfolios.
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Challenges for Middle-Class Investors:
- Middle-class investors may face difficulties in finding good financial advisors.
- They are vulnerable to bad advice, high fees, misinformation, and aggressive sales pitches.
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Frequency of Financial Advisor Engagement:
- Not everyone needs a full-time financial advisor; occasional meetings or short-term engagements might suffice.
- Occasional assistance ensures that retirement plans, like 401(k)s, remain on track.
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Options for Reliable Financial Advice in 2024:
- Emphasizes the availability of trustworthy financial advice.
- Suggests options for investors seeking guidance.
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Importance of Fiduciary Financial Advisors:
- Recommends working with fee-only fiduciary advisors.
- Defines "fee-only" and "fiduciary" and stresses the importance of putting clients' interests first.
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Risk of Non-Fiduciary Advisors:
- Highlights the potential risks of working with non-fiduciary advisors.
- Non-fiduciary advisors may prioritize commissions over clients' financial goals.
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Role of Good Fiduciary Advisors:
- Describes the role of good fiduciary advisors.
- They provide comprehensive financial recommendations, including what not to do with money.
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Types of Financial Advisors:
- Introduces different types of financial advisors, including Certified Financial Planners® (CFP), financial coaches, and robo-advisors.
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Certified Financial Planner® (CFP):
- Explains the significance of the CFP designation.
- CFP advisors prioritize clients' interests and offer various financial planning services.
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Financial Coaches:
- Draws parallels with executive, business, and life coaches.
- Financial coaches assist with budgeting, debt management, and financial organization.
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Robo-Advisors with Human Advisors:
- Describes robo-advisors and platforms offering both automated and human financial advice.
- Platforms like SoFi, Fidelity, and Vanguard provide access to Certified Financial Planners®.
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Access to Financial Advisors for Middle-Class Investors:
- Emphasizes that even if not suited for high-priced wealth management, middle-class investors can access quality financial advice.
- Encourages seeking fee-only fiduciary advisors, CFPs, reputable financial coaches, or online brokerages with financial advisor services.
In conclusion, navigating the realm of personal finance requires careful consideration of the options available. Middle-class investors can make informed choices by aligning with fiduciary advisors, exploring various advisor types, and leveraging online platforms for financial guidance.
