Many professionals find hiring a financial advisor to be extremely beneficial for their future goals and financial plans. They’re often categorised as experts who can offer professional guidance on investments, mortgages, and pensions. They can help you achieve your goals and prevent costly mistakes, and doesn’t everyone want some support in big financial decisions?
Keep reading to learn more about choosing a financial advisor, such as Solace Financial, below.
Choosing the Correct Type of Financial Advisor
There are plenty of types of financial advisors available, specialising in specific areas of the market. For example, you can choose to get expert advice from advisors specialising in mortgages, investments, or even pensions. Financial advisors should be regulated, so you can rest assured that the person you choose to hire will have your best interests at heart.
We’ve detailed the two most common types of financial advisors below:
Whole Market Financial Advisors
Whole market financial advisors are able to provide an entire spectrum of financial advice and providers, without having to restrict you to particular products and services. They offer unbiased advice and are often called independent financial advisors (IFAs). These advisors are excellent if you’re not sure what areas of expertise you require.
Restricted Financial Advisors
Restricted financial advisors are restricted in what they’re able to recommend to you, whether that be a specific list of products, providers, or both. For example, the advisor might be tied to a bank or financial institution and therefore only able to offer services from this specific provider.
Factors to Consider when Selecting a Financial Advisor
There are plenty of things to consider when choosing a financial advisor, and this isn’t a choice to make lightly. You need to make sure that your chosen provider is suitable for your needs and required services. There are some vital factors to consider when choosing a financial advisor, including:
- What type the advisor is and whether they’re able to recommend whole market services or they’re tied to an institution to restrict their advice
- The advisor’s area of expertise and whether these will align with your financial goals
- How you’re going to gel with the advisor and if you’ll be able to build a good working relationship with them to make sure you can communicate efficiently
- The advisor’s style of offering advice, such as face-to-face meetings or phone calls
- Whether you can fit the advisor’s fees and payment structure into your budget
What Fees Might Financial Advisors Charge?
The fees your financial advisor charges will depend on whether you’re working with a fee or commission-based agreement. There are plenty of types of fee structures that advisors might opt for, including:
- Percentage Fees
The most common type of financial advisor fee is percentage-based, meaning they get a cut of your money either invested or managed. They might charge for setting up products and managing ongoing products. You may even find that there are underlying investment portfolio charges. Most people like percentage fees as you won’t find yourself overcharging for smaller investments. The only drawback is that the higher your investments, the higher the fees will be.
- Fixed Fees
Fixed fees are offered for one-off pieces of advice, such as discussing pension plans and setting up initial financial plans. These are suitable for people who don’t necessarily need ongoing advice but rather want an initial session to set them up for the future.
- Hourly Fees
Certain advisors charge an hourly fee that tends to range from $75 to $300 depending on the services they provide. Advisors will give you an estimated number of hours you’ll need to meet your goals, and the invoice will detail the hours spent on each service.
- Subscription Fees
Clients using financial advisors as an ongoing service can sometimes use a subscription-based model. Only certain clients are suitable for this payment method, often called a Henry (high earning, not rich yet). Subscription fees can vary from advisor to advisor, but they tend to be around $50 to $100 per month.
Final Thoughts
The better your financial advisor suits your needs, the better advice you should get and therefore you may be able to make better financial gains. Choosing the right advisor for you is essential, so don’t rush into this decision. Make sure you consider factors such as the type of advisor they are, their specialist areas of expertise, and whether you can build a good working relationship with them.
You should also be clear on the type of fees each advisor requires and whether you can budget for this without sacrificing other expenses. After all, hiring a financial advisor who’s too expensive isn’t a sound financial decision in itself!
