Why Hire an Advisor Anyway?Submitted by Larry Frank Sr. on Tue, 06/18/2013 - 3:00pmIf you want to do plan your financial life well, you can’t just start investingon your own without taking a step back and looking at the big picture. Youneed to hire the right professional to guide you.A competent financial advisor knows how to make your money work foryou and help you navigate today’s economic uncertainties. The advisorunderstands what you can and can’t control – and can help you set thesails in good and bad times.An analogy to medicine is apt. You may have a great understandingabout a disease you may have from an Internet search about it. Yet, evenwith this knowledge, you don’t just try a cure yourself and hope that itworks. You still go to a doctor.Simply researching medical problems provides few clues about the cure.It takes a professional to get a full picture and make an accurate diagnosisand prescription. Do you understand the interactions between drugs andhow your body metabolizes them? What are the side effects? It’s evenmore complicated when you have two or more medical issues going on.The same goes for your finances. Many people can use the Internet todayto make financial calculations. But not everyone knows how to combinetheir goals with the right calculations to understand how their wholefinancial picture works. There is a wealth of calculators online that couldgive you pointers on a debt payment or retirement savings plan. But mostnon-professionals don’t understand how those numbers interact.In fact, different calculators give different results with the same inputsbecause of assumptions hidden in the calculator. The figuring gets morecomplicated when you have more than one goal. For example, how mightprepaying your mortgage interact with retirement planning when you arestill working (click here for the calculator interaction explanation)? How doyou decide on priorities? What are the side effects from your decisions?
An advisor can help with that.Plenty of folks turn away our help because they misunderstand what wedo. Financial planning isn’t just about investing or buying financialproducts. These common perceptions put the cart in front of the horse.If you look at the financial planning process laid out by the CertifiedFinancial Planner Board of Standards, you see that there are four othersteps before you even get to the common questions. You first must findout what you need and what is right for you.Without the planning process and the guidance of a trusted advisor, youmight put your money into a sales trap and buy something that isn’tappropriate for you. You and your advisor have to do a little homeworkfirst.Naturally, if you are just beginning or trying to learn how to undo amistake, it takes a while to understand the process. The first step isestablishing a relationship with a planner, then gather all the relevantdata to get full and detailed view of your financial situation and identifyyour goals, such as getting out of debt or saving for retirement. Theadvisor reviews your situation and runs models to find what changes youneed to make. Before you implement his or her suggestions, you reviewthem. Investing and portfolio allocation are not the main focuses of theplanning process.Some advisors work on commission, and it’s important to understandhow they are compensated for the recommendations they make. Youcan get an idea of what to expect from them by askingthe questions listed on the CFP website.Alternatively, you may go through the same process using fee-onlyadvisors that are certified by the National Association of PersonalFinancial Advisors. Some clients prefer to go this route because theyknow that the advisor doesn’t receive commissions, and they believe thismakes their advice more objective.You can find a local financial advisor through the AdviceIQ rankings,NAPFA or the CFP Board’s website. NAPFA also has a tool to use toquestion advisers before you choose one.Financial success requires patience and concentration first. Justchoosing an adviser that you can work with takes time. Don’t expect anadvisor to solve all of your problems quickly, either.Just don’t jump right in blind and allocate your investments yourself firstand think about the full financial plan later.Follow AdviceIQ on Twitter at @adviceiq.Larry R. Frank Sr., CFP, is a Registered Investment Adviser (California)in Roseville, Calif. He is the author of the book, Wealth Odyssey. He hasan MBA with a finance concentration and B.S. cum laude in physics with
which he views the world of money dynamically. He has peer-reviewedresearch published in the Journal of FinancialPlanning. www.blog.BetterFinancialEducation.com.AdviceIQ delivers quality personal finance articles by both financialadvisors and AdviceIQ editors. It ranks advisors in your area by specialty.For instance, the rankings this week measure the number of clients whoseincome is between $250,000 and $500,000 with that advisor. AdviceIQalso vets ranked advisors so only those with pristine regulatory historiescan participate. AdviceIQ was launched Jan. 9, 2012, by veteranWall Street executives, editors and technologists. Right now, investorsmay see many advisor rankings, although in some areas only a few areranked. Check back often as thousands of advisors are undergoingAdviceIQ screening. New advisors appear in rankings daily.Topic:Dealing with Financial AdvisorsCreating Financial PlansHow to Pick Them