If you’re feeling overwhelmed by money problems, you may need financial advice. You can get it: there are financial advisors who cater to all kinds of financial needs and work with all kinds of financial problems.
Many people need a financial advisor: in a recent survey approximately 71% of Gen Z and 72% of millennials indicated that they need financial advice. Many of them hesitate to reach out for professional financial advice, often because they don’t think they can afford it.
Many people don’t realize that professional financial advice is widely available and that it can even be free.
Who Should Use Financial Advisors?
There’s a long-standing myth that only the ultra-rich hire financial advisors. The misconception dates back to the days when the term “financial advisor” typically referred to wealth managers and investment advisers catering to high-net-worth clients.
Today that has changed, and there’s a much wider range of financial professionals providing advisory services to people from all walks of life, including those in financial distress.
If you’re facing financial problems that you don’t fully understand or that you don’t feel prepared to solve, you should consider using a financial advisor.
👉 According to our recent survey, most people (75%) recognize that the potential of financial advice goes beyond delivering investment returns and into the realm of goal fulfillment.
Why Do You Need a Financial Advisor?
People seek financial advice to deal with many different problems, but those problems fall into three broad categories:
- You’re Already On Top – Wealthy individuals hire professional advisers to manage their financial affairs. This is the traditional view of a financial advisor, and it’s one that most of us will never be able to afford.
- You’re Moving Forward – Many of us start out with only one financial goal: getting to the next paycheck without running out of money. As we move to better-paying work and gain financial stability, we face new financial problems, often very complex ones.
We may need to select investments, set up tax-advantaged retirement accounts, choose insurance, buy a home, set up special accounts to save for a child’s education, or plan our estates. Many of us seek financial advisers to help.
- You’re Falling Behind – Many of us are gaining financial stability. In an age of static wages, soaring prices, and escalating interest rates, many Americans are barely keeping up, and many are falling behind, slipping into an overwhelming tide of debts and costs.
Many of these people desperately need financial advice, and they are often the ones least likely to get it.
Types of Financial Advisors
There are types of financial advisers to meet each of these needs. You’ll need to seek out the one that’s best suited to your personal situation.
1. Credit Counselors
Many people don’t think of credit counselors as financial advisors, but they are. Credit counselors typically work with individuals in financial distress, helping them learn to budget their resources and get their debts under control.
Credit counselors often work for non-profit credit counseling agencies, and many of these agencies provide free initial consultations. If your financial problems seem overwhelming, a free session with a credit counselor can be a great start toward taking control.
Many credit counselors carry a Certified Credit Counselor credential from the National Foundation for Credit Counseling (NFCC) or the National Association of Certified Credit Counselors (NACCC).
2. Financial Therapists
Financial therapists address the root causes of money issues, helping people recognize and address problems stemming from their fundamental thoughts, feelings, and attitudes toward money.
Financial therapy bridges two disciplines: financial planning and psychotherapy. It’s aimed less at goals like building a financial plan than at helping people understand (for example) why they never seem able to follow a financial plan.
If you feel that you can’t communicate about money issues, you suffer serious money anxiety, or you have recurring self-sabotaging financial behavior, a financial therapist might be able to help.
3. Certified Financial Planners
Certified Financial Planners (CFPs) are required to gain certification from the Certified Financial Planner Board of Standards in the United States by passing the requisite exam and having approximately 6,000 hours of professional financial planning experience. Applications with 4,000 hours of apprenticeship experience are also eligible for the highly-coveted CFP certification.
CFPs are trained in financial planning, estate, and retirement planning, as well as tax and insurance calculations. With a 67% median pass rate, the Chartered Financial Planning exam is one of the most reputable courses for financial planners in the U.S.
Most wealth managers often have a CFP degree, and financial Planners with a CFP degree can meet a wide range of advisory needs.
4. Investment Advisers (FINRA Registered)
The Financial Industry Regulatory Authority, or FINRA, is a self-regulatory body under the purview of the SEC. So investment advisers must have multiple FINRA licenses (commonly Series 6 and 7) to ensure investors get proper and transparent investment guidance and complete disclosure. With authorization from Congress, FINRA currently monitors more than 624,000 brokers across the U.S.
Thus, FINRA-registered advisors are typically considered the top tier of investment advisors in the country. Though returns are not guaranteed, it is safe to assume that FINRA-registered financial planners can help you navigate the markets safely and deliver quality returns.
Broker-dealers typically work for financial institutions and execute orders on behalf of clients. While they generally work as agents executing trades, broker-dealers often provide investment advice and guidance to investors. They can act as independent broker-dealers as well.
Investment advisors must register with the SEC and FINRA, with only a few exceptions.
Unlike FINRA-registered investment advisors, broker-dealers earn commissions from each trade successfully executed. Full-service broker-dealers often make money from their consulting services.
6. Investment Managers
Investment managers solely focus on managing clients’ investment portfolios. They generally have relatively high minimum investment requirements and percentage-based commissions and fees, and cater to clients with substantial funds. Leading investment management firms such as Blackrock Inc. and Fidelity Investments often charge incentive-based commissions on returns as well.
Investment managers often have decades of experience in their fields and custom-design a portfolio, keeping a client’s risk appetite and long-term goals in mind. Active investment managers also keep reorganizing portfolios depending on market conditions to deliver maximum returns.
7. Wealth Advisors
Wealth advisors provide comprehensive financial management services to high-net-worth individuals. Apart from specific investment advice, wealth advisors often act as accountants and provide estate, retirement planning, and tax management services. The consensus advisory fee charged by wealth advisors is usually around 1% of the total assets under management (up to $1 million).
They also set up and maintain trusts for their clients, which are essential to retirement planning. In addition, wealth managers take care of their client’s tax liabilities, considering they generally have higher payment obligations. Wealth advisors are often tasked with reducing or deferring clients’ tax liabilities through strategic investments.
As the number of ultra-wealthy individuals has risen substantially since 2020, the demand for wealth advisors has also risen simultaneously. As a result, by 2025, the global wealth management industry is expected to have an AUM of roughly $145.4 trillion.
Taking investment advice from a machine might seem strange, but algorithmic trading makes headway in stock market investing. Robo-advisors deploy algorithms to determine the best investment pathways. As artificial intelligence gains traction, financial institutions are developing personalized algorithms to deliver market-beating returns.
According to a recent CNBC article, Robo-advisors in the U.S. might soon manage nearly $1 trillion in total wealth. Analysts are predicting the Robo-advisory industry to reach $1.2 trillion by 2024. As David Goldstone of Backend Benchmarking said about Robo-advisors, “They’re everywhere now … Just about every major bank and discount broker launched one in the past decade.”
Which Financial Advisor Should You Opt For?
The type of financial advisor you select will depend on your specific needs: a person struggling to get out of debt will need a different type of advice from someone who is building an investment portfolio.
If you are shopping for financial advice, however, there are two terms to keep in mind.
- Fee-only advisors are compensated only by client fees. That means they are not, for example, taking commissions from providers of products they might recommend.
- Fiduciaries are advisors with a sworn legal duty to work only in the interest of the client.
Using a fee-only advisor with fiduciary status gives you confidence that an advisor is working for you, not for someone who’s paying a commission.
Whatever type of advisor you choose, shop carefully. Always check an advisor’s credentials and reputation before signing on.
We said it at the start, but it’s worth repeating: financial advisors are not just for the rich. If you need to know more about money, decide what advice you need and look for it!
📚 Read more: What’s the #1 Thing People Should Ask Their Financial Advisor (But Never Do)?