Nobody likes taxes. No matter how old you are, dealing with taxes can feel overwhelming—especially as you grow your wealth and get closer to that dream retirement.
A tax professional can explain in plain English how taxes will impact your finances. This stuff is too important to put off for tomorrow! For most people, making a will and getting term life insurance is enough—and you can always adjust and adapt as your life circumstances change. They can give you the guidance you need to create a plan to make sure your wishes are carried out. What can you do to prepare for those major expenses in that chapter of your life?
A financial advisor or insurance agent can explain your options for long-term care insurance. If you expect to receive an inheritance down the road, you may be wondering about everything from the tax implications to the best way to use the funds. A financial advisor—think wealth managers and financial coaches—can help keep that blessing from becoming a burden. They can advise you on how to adjust your financial goals and strategies, and they can tackle hard questions—like projected taxes. They can also walk you through the practical steps to take when that time comes.
Choosing a financial advisor is a big deal, folks! This is someone you could end up partnering with for years, maybe even decades , to help you build your wealth. So how do you know which financial advisor is right for you? What do you do when you have two bad options to choose from? Find more options. The more options you have to choose from, the more likely you are to make a good decision. A good rule of thumb is to try to interview at least two to three financial advisors before you ultimately decide who you want to work with.
Our SmartVestor program can make it easy for you by showing you up to five financial advisors who can serve you. You want to hire a financial advisor who has the heart of a teacher. Sometimes, advisors get so full of themselves because they have more degrees than a thermometer.
If an advisor starts talking down to you, it might be time to show them the door. A financial advisor works for you— not the other way around. Remember that! You want an advisor who has a long-term investing strategy, someone who will encourage you to keep investing consistently whether the market is up or down. We recommend spreading out your investments between four different types of mutual funds : growth, growth and income, aggressive growth, and international.
They're almost always the lowest-cost option, and their computer algorithms will set up and manage an investment portfolio for you. You're probably a good candidate for a robo-advisor if:. You need to save for retirement but aren't sure where to begin. You want to benefit from stock market returns but don't have a lot of time to learn how to invest.
You have a lump sum you want to invest for one or more future financial goals. You don't have much money to invest yet — robo-advisors typically have low or no account minimums.
The questions help identify your goals, investing preferences and risk tolerance. The service will then provide ongoing investment management, automatically rebalancing your investments as needed and taking steps to reduce your investment tax bill.
The low-cost, easy-entry nature of robo-advisors makes them a good choice for many consumers. Online financial planning services offer investment management combined with virtual financial planning. The cost is higher than you'll pay for a robo-advisor, but lower than you'd pay a traditional advisor.
Consider an online financial planning service if:. You want to work with a human advisor, but you don't mind meeting that advisor by phone or video. You'll save money by meeting virtually but still receive investment management and a holistic, personalized financial plan.
You want to choose which financial advice you receive. Some services, like Facet Weath , charge a flat fee based on the complexity of the advice you need and investment management is included. Others, like Betterment , charge a fee for investment management and offer a la carte planning sessions with an advisor.
Facet Wealth and Betterment are NerdWallet advertising partners. For many people, this model is the right fit — it combines lower costs with a high level of service.
Here's what to expect from an online planning service:. Some services function like hybrid robo-advisors: Your investments are managed by computer algorithms, but you'll have access to a team of financial advisors who can answer your specific financial planning questions. At the other end of the spectrum are holistic services that pair each client with a dedicated CFP, a highly credentialed expert.
Either way, you should receive investment management and personalized financial guidance to help you meet your goals. In addition to robo-advisors and online planning services, the term "financial advisor" can refer to people with a variety of designations, including:. CFP: Provides financial planning advice. To use the CFP designation from the Certified Financial Planner Board of Standards, an advisor must complete a lengthy education requirement, pass a stringent test and demonstrate work experience.
Broker or stockbroker: Buys and sells financial products on behalf of clients in exchange for a fee, commission or both. Must pass exams and register with the U. Securities and Exchange Commission. Registered investment advisor: Provides advice and makes recommendations in exchange for a fee.
RIAs are registered with the U. Securities and Exchange Commission or a state regulator, depending on the size of their company. Some focus on investment portfolios, others take a more holistic, financial planning approach. Learn more about investment advisors.
Wealth managers: Wealth management services typically concentrate on clients with a high net worth and provide holistic financial management. But you may decide to go for it if:. You're undergoing or planning a big life change , such as getting married or divorced, having a baby, buying a house, taking care of aging parents or starting a business. Your investments have grown or your financial life has gained complexity beyond what a robo-advisor or online advisor can handle.
You want to meet with someone in person and willing to pay more to do so. Here's what to expect from a traditional advisor:. You'll likely meet in person at a local office. The advisor will provide holistic planning and assistance to help you achieve financial goals. They must establish trust with clients and respond well to their questions and concerns. Financial advisors assess the financial needs of their clients and provide them with professional investing advice for the short- and long-term.
There are a variety of areas that financial advisors can help their clients in — budgets, savings, stocks, bonds, education expenses, retirement funds, tax advice, insurance, etc. Although most financial advisors offer advice on a wide range of topics, some specialize in areas such as retirement or risk management evaluating how willing the investor is to take chances, and adjusting investments accordingly.
After they have invested funds for a client, they, as well as the client, get regular reports of the investments. They monitor the client's investments and meet with each client at least once a year to update them on potential investments. They may adjust the financial plan during this time due to the client's changed circumstances or because investment options have changed. Many financial advisors are licensed to directly buy and sell financial products, such as stocks, bonds, annuities, and insurance.
Depending on the agreement they have with their clients, advisors may have the clients' permission to make decisions about buying and selling stocks and bonds. Private bankers or wealth managers are personal financial advisors who work for people who have a lot of money to invest. These clients are similar to institutional investors commonly companies or organizations , and they approach investing differently from the general public. Private bankers manage a collection of investments called a portfolio for these clients by using the resources of the bank, including teams of financial analysts , accountants , and other professionals.
Financial advisors have distinct personalities. They are dominant, persuasive, and motivational. Does this sound like you? Take our free career test to find out if financial advisor is one of your top career matches. Financial advisors typically work in offices, either as part of a bank or an investment office.
Approximately one-fourth of financial advisors are self-employed. Most advisors work full time, and occasionally overtime is needed. Financial advisors spend a great deal of time marketing their services. They meet potential clients by giving seminars or through business and social networking. There are a variety of financial professionals that are trained to offer specialized financial advice. The following are four types of financial advisors available to the public, and details on the types of services they provide:.
Financial Planners Financial advisors and financial planners are often used interchangeably. However, they are not the same thing. Simply put, financial advisor is an umbrella term that refers to anyone who helps clients manage their money. Financial planner , on the other hand, refers to a specific type of financial advisor that can help individuals and companies put together a plan to meet their financial goals. Client goals can be anything from paying off debt, saving for university, estate planning, or investing for retirement.
Financial planners can give clients a big picture of how the financial market works, explain complex financial terms in simpler language, and counsel their clients on the risks of different investments. Some financial planners only give advice, and some give advice as well as sell products. Many financial planners decide to focus on one specialization, such as taxes, estate planning, retirement, or investments.
These designations and licences require further education. Most clients prefer to hire certified financial planners CFPs who are also fiduciaries this means that they are legally obligated to act in a client's best financial interests even if they make less money. However, hiring a financial planner can be worth the cost in certain situations, such as:. Wealth Management Advisors - If an individual earns a substantial amount of money, it makes sense to hire a financial planner to help with coordinating all the accounts, saving on taxes, investing wisely, and planning the estate.
Self-Employment - If an individual is a small business owner or a freelancer, it is hard to budget and to deal with issues such as quarterly tax filings, self-employment taxes, special deductions, employee pay and benefits, and retirement plans.
A financial planner can help with sorting these issues out, and more. Retirement - Individuals that are planning to retire need to sort out how much money they will need to live on, how to withdraw money from retirement accounts, and how to maximize Social Security benefits.
Those who are younger and want to retire at a certain age with a certain amount of money available to them will need to know what to invest their money in, and how much they will need to put away each month in order to make that happen. Family Planning - Individuals that are getting married and having children need to know how to combine finances, file taxes jointly, budget for their children's university expenses, purchase life insurance, and plan their estate.
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