Financial Advisor

What Does a Financial Advisor Do: 8 Essential Facts About Financial Advisors

What Does a Financial Advisor Do: 8 Essential Facts About Financial Advisors

Buying a home sometimes produces a roller coaster of emotions, from eagerness and excitement to uncertainty and apprehensions. You might be somewhere in between. Researching on the home buying process is a good first step. Next thing you need to do is to talk to a Financial Advisor so you’ll have someone who is qualified to answer all of your finance-related questions and give you confidence in the decision you are about to make. 

What Does A Financial Advisor Do?

Financial advisors help you understand your current financial situation. Once you know where you stand, you can make better, informed decisions in terms of your financial capabilities. Financial advisors can also help you set up financial goals and plans for the future, including the purchase of a new home. You can also ask them how much house can you afford and they’ll tell you based on your financial information. 

Financial advisors may include financial planners, brokers, or even accountants. However, financial advisors differ from these other professions due to the number of certifications, financial planning courses, and exams that they are required to take.

How To Become A Financial Advisor

A Financial advisor has, at the very least, a Bachelor’s Degree. The degree leans toward the business or finance programs. They are then mentored by other financial advisors from different firms. Financial advisors then have to undergo continuous education to keep on providing valuable financial advice to their clients. 

It is important that your Financial advisor holds certain certifications and licenses. This way, you can be sure that you really are talking to an expert and that they can help you achieve the financial freedom that you seek. 

When hiring a financial planner, you need to check if he or she is a Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFC). Financial advisors who help manage investments must hold a Series 65 securities license. License and certifications serve as proof that the advisor has completed the required education and experience needed in financial planning. Moreover, these titles show that they have passed an extremely thorough examination.


Types Of Financial Advisors

There are different types of financial advisors and the classification is somehow linked to how they are generally compensated: 

Personal financial advisor

A Personal financial advisor usually works for a firm. They assess a client’s financial situation and help them plan depending on their financial short or long term goals. These advisors often earn by commission or are fee-based advisors. 

These advisors are licensed to sell financial products such as mutual funds, stocks, bonds, etc and they are paid based on the specific financial product or service that they sell. This is why they are not truly objective and sometimes they may not have your best interest in mind.

They usually charge upfront fees for their services and earn a commission from the financial products that they sell.  

Fiduciary Financial Advisor

A fiduciary financial advisor is someone who puts the client’s best interests first. Legal requirements state that they should be very objective in all their dealings with their clients. They manage investments, make recommendations in portfolio, and sell products to clients, without regard for commissions and compensation. 

They are the fee-only advisors, who earn money only on the services that they provide to their clients. An advantage of hiring a fee-only advisor is that he or she doesn’t act like a salesman.

They get paid based on the advice and services rendered to clients. 

Moreover, potential conflicts of interest are also eliminated. Getting a fiduciary financial advisor is essential if you want sound, objective advice. This way, you can be sure that your money is in good hands!


Financial Advisor Salary

Most financial advisors who provide continuous service charge clients a 1% annual fee based on the assets that they manage. So if a client has $100K in investments, the financial advisor gets $1,000 each year from managing that investment. 

Others charge flat rates or hourly fees. There are those who charge around $1,500 to $2,500 if you need a full financial plan. For hourly fees, financial advisors usually charge $300 to $500 by the hour. 


How To Find A Financial Advisor

One of the best ways to find a good financial advisor is by word of mouth. Ask family members, friends, or your colleagues for recommendations. If you know people that are in a really good financial situation, then, by all means, inquire about how they manage their portfolio of investments and who they trust. 

You can try looking online for fee-only / fiduciary financial advisors. There are also some sites that provide tools for matching with financial advisors. Here they can help you find a really great professional in just a few clicks. 

What’s also important is for you to look at the fee structure of the financial advisor and their license and certifications. As previously mentioned, it would be best if your financial advisor is a Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFC).

Questions To Ask A Financial Advisor 

It can be difficult to decide who to hire. This is why here we give you a few questions that you can ask financial advisors to help you choose who can best address your needs: 

1. What are your qualifications? 

It is important that the advisor holds certifications and licenses 

2. Are you a fiduciary? 

You need to know upfront if the advisor works in your best interest

3. How do you earn your income? 

Keep it simple and avoid conflicts of interest. Go with a fee-only advisor. 

4. What are the other costs when it comes to investments?

Apart from the advisor’s fee, it would be best to know of other fees involved when it comes to placing certain investments.

5. How often would we meet and how can I communicate with you?

You need to know how much access you have with your advisor, should you need advice on financial matters. It is also important to know if he/she can take phone calls or answer emails. 

6. How much do I get after fees and taxes?

It would be good if your advisor also has your tax bill in mind when managing your assets and finances. 

7. What are your typical clients like? 

It can work to your advantage if the advisor handles clients with similar background, needs, and financial goals as yours. 

8. How do you allocate assets? 

Check if the advisor places value on a diversified portfolio, and also if he/she recommends real estate investments

9. Do you hire an independent brokerage to hold investments?

This is important for checks and balances to reduce mistakes and prevent unethical behavior. 

10. What benchmarks do you use in investing?

When you do your own research, it would be good to know if your financial advisor is benchmarking investments correctly to maximize gains. 

Financial Advisor Benefits

Financial advisors have expertise in financial planning and investment management. They can help you optimize your money, maximize the value of your assets, and just plainly get the most out of your savings. 

Financial advisors provide that objective view and perspective. They can take emotions out of the decision-making process and streamline your financial goals. They help you make better financial decisions. 

Financial advisors help you become more practical with your finances and also expenses. Will buying a house be more financially practical vs. renting? How do I know how much house can I afford? These are just a few questions that your financial advisor can answer for you.

What Is A Real Estate Financial Advisor?

We earlier mentioned about financial advisors managing assets such as stocks, bonds, currencies, etc. These are what you call paper investments. Real estate is also an investment, and what is called a hard investment. There are people who say that real estate is the ultimate investment, considered even better than stocks, bonds or gold. 

If you want to diversify your investment portfolio, you should include real estate. You can seek the advice of Real Estate financial advisors since they are the ones who are most familiar with the financial side as well as the ins and outs of investing in real estate. 

Since financial resources are finite, you need to think of a way to keep the cash flowing. Real estate financial advisors would tell you why one of the best investments you can ever make is in real estate.  

  • When you buy a house, you can later rent it out. 
  • Appreciation of 4%
  • Tax benefits / tax shelter

How To Financially Plan To Buy A House

As first-time home buyers, you need to make sure that you are financially ready to purchase that new house. We know that there are a lot of things on your mind regarding the home-buying process. Rest assured that even if this is one of the most important investments you might make, buying a house is really financially manageable. You can always seek the help of a fee-only / fiduciary financial advisor, but here are a few things that you can do on your own for starters: 

  • Save, save, save! – Putting money aside every payday does wonders to your financial capabilities and buying power. When you have more money saved up, you can make bigger down payments. This means that you can also save on additional insurance costs.  
  • Be aware of your credit score or FICO score – Lenders will always refer to this to determine whether or not to grant you a mortgage. Knowing your credit score gives you the advantage of knowing if you’re already at the qualified level to buy a house or if you still need to improve on it.
  • Pay your bills on time – Your credit history is very important. Make sure to pay your bills when they are due. If you dream of buying that new home, payments on utilities, your credit cards, car loan, and even student loan payments must be prioritized over wanting new shoes or luxury bags.
  • Do you own research – It would be best if you would have your own realistic budget when planning to buy a house. You also need to take into consideration other costs that are attached to buying a home. These include homeowners insurance, property taxes, service fees, maintenance and repair, and utilities. Online information can provide relevant and useful advice on how to buy a property.

Take The Plunge And Invest In Real Estate

When planning to purchase a home or invest in real estate property, one way to help you make sound and practical decisions by seeking the help of a financial advisor. You know you have money saved up, the hesitation may be brought about by lack of knowledge on financial opportunities or unfamiliarity with the real estate industry. 

Apprehensions may come from not knowing that you can already afford to buy a house. Seeking the help of a financial advisor will make you realize how much house you can afford and what your options are to achieving your goal … and eventually benefiting from it!

Making that home purchase is really not as difficult as you think. You’ve made the first steps and all you have to do is to follow through on the process.  Seeking the help of a fee-only, fiduciary, Real Estate Financial Advisor makes the process even easier. The doubts and apprehensions you might have had will be assured by sound, practical, and objective financial advice. All you need to do is to take action on your plans in order to achieve that dream home. 

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