[This post is the last in a series of three that discusses the role of stockbrokers, investment advisors and financial planners.]
The world of finance and investing can be quite complex, and many people often seek the expertise of a professional to assist them in making those important decisions. Now, we enter the world of “financial professionals—stockbrokers, investment advisors, and financial planners. Because of the range of services that can be provided by these different individuals, it can be confusing to know who to seek for advice. Below, I will help explain the different role each player takes in the financial world, and help you find the right professional.
Financial planners evaluate a client’s current financial status and develop a strategy to meet their short- and long-term financial objectives. Many financial planners specialize in a certain field: insurance and risk management, tax planning, retirement planning, or estate planning. Looking at the firm the planner works for can help you identify what area the advisor is geared towards. If they work for an insurance firm, they will focus on using insurance products for risk management and estate planning. A planner working for a brokerage house will focus on using mutual funds to meet the client’s objectives.
A financial planner can be compensated in multiple ways. They may charge a flat fee for creating a financial plan, or they may receive commissions on products they are licensed to sell. They may also receive a percentage of the assets they manage under the plan.
Choosing a financial professional is a big step for many people. They are entrusting an important part of their lives to the direction of someone else. Stockbrokers, investment advisors, and financial planners all focus on different aspects of the financial landscape, and understanding their role will help you decide which is right for you.
Often, a professional can fit into multiple categories, such as a portfolio manager who builds financial plans for his clients as an extension of his services. In the end, it is important for you to talk to the potential professional to understand what services he provides and how it best accomplishes your goals and objectives.