By Nicholas W. Stuller
I spend a lot of time interacting with the general public on issues involving money, investing and financial wellness. During phone calls, emails, social media posts and zoom calls I am constantly hearing about the various worries and needs from investors and consumers-the latter group being someone who does not yet have an investment portfolio.
What is very clear is that most people are not aware that modern financial advice includes so much more than investing in a portfolio of stocks or mutual funds. Their thinking is this: “I don’t have an investment portfolio, therefore I don’t need an advisor”. This lack of awareness is not just from those of modest means, but very well-off people are also unaware of the wide variety of financial advice expertise that more and more financial advisors provide to their clients.
More Than Just Investing
“What is more important that making sure my portfolio has the highest possible rate of return?” Is the question I also get and I see on a regular basis. In short, the answer I give is you could benefit from something called a financial plan. A financial plan is essentially a blueprint of your entire financial plan taking into account your goals and desires. It looks at your savings, spending, insurance, college funding, taxes, inheritance and yes, your investment portfolio and many other details of anything that involves your financial life. The most well-known designation to show competency in financial planning is the CFP designation, but there are other designations that show expertise as well. Just like doctors, a consumer should get educated on what designation an advisor has and make sure that the designation is substantive based on your needs.
In fact, there are financial planners that focus on very specific types of clients, for example doctors, who have unique needs relative to other professionals. The list of niche financial planning needs is quite long but includes Millennials, Celebrities, and even those in the Military.
Highly Specialized Needs
In medicine, there are both General Practitioners and highly specialized doctors that only focus on one area, be it a disease like cancer or type of patient like pediatrics. Financial Advisors are quite similar in that there are generalists and highly specialized experts in one area, such as Employee Stock Option Plans, or Special Needs Planning for those families who have a disabled child. Unlike medicine, the examinations and licenses and rules allowing someone to call themselves a Financial Advisor are much less stringent than in medicine, so the investor/consumer needs to perform more diligence to avoid getting the wrong person for them, for example, someone who is in reality just selling certain products and not really giving advice in the best interest of the consumer.
Getting Easier and Getting Harder
It is getting easier to understand advisors and find the right one these days. There are sites like ours that match investors, there are questionnaires, trade groups, journalists and others that are resources to learn what questions to ask about who is the right advisor for you.
On the other hand, the financial industry in aggregate does not bend over backwards to educate investors enough and coupled with incredibly good marketing can induce people to take actions that are not in their own best interests. Firms like Robinhood that offer free stock trading and fractional stock investing have induced consumers that otherwise should not be investing to take inappropriate actions. While their stated mission to give investing access to everyone is admirable, their march to get large numbers of users without proper controls, or even stating on their website that there exists personal financial advisors and financial planners, has created notable problems.
Today’s financial advice offers far more than just guidance on buying a stock or a fund. It covers an incredible array of beneficial guidance on one’s financial life and investors and consumers alike will benefit by understanding the broader services that todays advisors offer.
Nicholas W. Stuller is the Founder and CEO of www.MyPerfectFinancialAdvisor.com, a 30-year veteran of the financial services industry and author of THE TRUTH SHALL SET YOUR WALLET FREE: Secrets to Finding the Perfect Financial Advisor, published in 2018 by Post Hill Press.