If you’ve ever thought about saving for retirement, purchasing a business, funding a college education or when (and how) to file for social security, it might be time to find a financial advisor.
When it comes to financial advisory firms, there are a plethora of terms – asset management, financial planning, risk mitigation, capital compounding, and more – all used to describe the vast services a financial advisor provides.
As you navigate the financial advisory waters, it’s important to understand the different types of advisors and the credentials that they hold to determine which is the right financial advisor for you.
What’s the Difference Between a Financial Advisor, Portfolio Manager and Asset Manager?
A financial advisor is an umbrella term used to describe a wide variety of people or digital services to help you manage your money. In general, an advisor learns about your family and goals to create a comprehensive and individual investment plan. He or she also reviews your financial plan regularly to adjust strategies as necessary.
Portfolio managers build and maintain investment portfolios for individuals or corporate investors. Their focus is the analytical side of investing rather than the sales aspect. This means they must have an in-depth understanding of market trends, conditions and overall market outlook. Portfolio managers must meet with their clients on at least an annual basis to ensure investment objectives have not changed.
Closely related to a financial advisor, an asset manager looks at the whole financial picture and manages assets like stock holdings, bond issues and real estate. His or her primary goal is to optimize your return on each asset while minimizing the risk level.
Then there are “robo-advisors.” These are digital platforms that offer financial advice or investment management online with pretty minimal human supervision and personal contact. This type of “light” financial planning provides digital financial advice based on mathematical rules or algorithms, not taking into account your personal financial situation or goals.
Although robo-advisors might be a suitable option for some people, the lack of human interaction makes them less than ideal for clients with more complex portfolios. An investment firm is much better suited to help you achieve your specific financial goals.
What the Different Financial Services Credentials Mean to You
Perhaps two of the most talked about designations in finance are Certified Financial Planner (CFP) and Certified Financial Analyst (CFA). While they sound similar, a CFP and CFA serve different interests. And to find a financial advisor that meets your needs, you should understand the difference.
A CFP is considered the gold standard in the industry. Financial advisors must have several years of experience, take an extensive course and pass a six-hour exam to become certified. They advise individuals on managing their personal portfolio and planning for the future. You might seek out a CFP to advise you on tax planning, estate and retirement planning, insurance, investment management and more.
A CFA, on the other hand, can be used for both corporate and personal financial planning roles. They are closely related to portfolio managers as they evaluate financial situations and make the appropriate recommendations. This type of financial advisor is a critical thinker, identifying potential problems with investment options and seeking a solution to the problem.
Financial analysts can work as investment advisors, or work for banks and insurance companies. Others can specialize in mergers and acquisitions, determining the profitability of two companies combining forces, or one company purchasing another company in an acquisition.
Find a Financial Advisor and Investment Firm
If you are actively trying to find a financial advisor at a financial advisory firm, there are several things you should consider:
- Verify the credentials of the advisor who will be working on your account. You can check if an advisor is a CFP and look them up through the Securities and Exchange Commission (SEC) or BrokerCheck.
- There are different ways you can pay a CFP. Some charge a commission based on the products you purchase from them. Others charge a set fee based on the size of your portfolio. You want to hire a CFP who is just as invested in your portfolio’s growth as you are.
- An investment professional who is a fiduciary has pledged to act in your best interest. Those who are not fiduciaries may try to sell you services that are suitable for you but not necessarily ideal or in your best interest.
- Education is important, but an advisor should have experience in managing real-life financial situations.
- Financial advisors have different styles, so shop around. Choose a person you trust, because they will know your most personal details.
It is ideal to find a financial advisor at any point in your life, whether you are looking to tackle a specific financial goal or want a macro view of your money and various assets. However, the earlier you shop financial advisory firms and enlist a specific advisor, the more control you may have of your prosperity.
Stableford is your partner in prosperity. As a fiduciary, we use an integrated advisory approach to look at your entire financial picture and advise on what is best for YOU. To learn more about our top asset managers and financial advisors, contact Stableford today by calling 480.493.2300 or contact us online.