Many people seek out professional help to organize, manage, and optimize their finances. But, what type of financial professional should you use?
Getting your finances in shape can be a tall order. It’s not the most exciting topic for many people and it can be extremely confusing to try to make sense of all of the details without making a mistake. Many people seek out professional help to organize, manage, and optimize their finances. But, what type of financial professional should you use?
Focus On Services Provided
It may be helpful to visualize the different service providers on a continuum. On one end of the spectrum, you have professionals that traditionally specialize in clients with little to no savings who may provide a very hands-on level of service. On the other end of the spectrum, you have professionals that focus on clients with savings who may be less actively involved in helping you make day-to-day financial decisions. And then there are professionals who fall somewhere in the middle.
Financial Coach Or Counselor. A financial coach or counselor typically focuses on fundamental financial issues or habits. “A financial coach works with a client to change behaviors around money,” said Stephanie Genkin, CFP® and founder of My Financial Planner. “That might be helping a client see where they can reduce spending to create more savings, or helping them get out of debt or understanding their emotions around money, which may have created obstacles to good financial management.” The client may meet with the coach or counselor on an ongoing basis to try to change negative habits – similar to the approach of a personal trainer.
Rebecca Wiggins, Executive Director of AFCPE, an organization that certifies financial coaches, added, “Unless the financial coach is also licensed as an investment advisor, they often focus on areas of financial management rather than investments and wealth-building. Whatever area they’re focused on, I believe in the importance of financial coaches having both rigorous and comprehensive training to ensure they have the skills they need to successfully help their clients.”People seeking this type of service may just be starting out in their careers and may not have much or any money at all.
Financial Advisor. At the other end of the spectrum are services provided by financial advisors that may be hands-off and purely transactional or product-focused. Think of financial professionals at large brokerage houses, such as Morgan StanleyMS -0.64%, Bank of AmericaBAC -0.76%, and UBS that may manage your investments for a fee plus typically commissions on product sales. They may meet with you quarterly to give you an update on your portfolio and answer a question or two about other financial topics throughout the year, but your relationship with them is focused on your investment portfolio, and specifically, the assets that they manage.
Carol Sankar, for example, uses a financial advisor. She said, “My financial advisor offers products to ‘house’ my investments. My advisor often sells the product that they know best, hence, although they know my goals, they only sell the options they have and rarely give me any alternate advice.
Financial Planners. There exists a large grey area in between these extremes where many professionals fall, and they’re often referred to as financial planners. Unlike financial advisors, who traditionally focus on a client’s investment portfolio, a financial planner generally analyzes a client’s entire financial life across cash and debt management, insurance, investments, tax, and estate planning. Eric Hutchinson, a financial planner and managing director of Hutchinson Financial, described financial planning as “a disciplined process to clearly define financial goals, gather information about resources available to meet those goals, and developing a plan to achieve them.”
These professionals generally charge fees based on a percentage of assets under management or a fixed fee and in some cases, could receive commissions from product sales as well.”
In the past, financial planners and financial advisors typically required a minimum asset level to begin servicing a client; hence, they targeted clients with savings. However, there is a growing group of financial planners. Empire NoLimit Investments are one of that growing group. Great news! we offer all three types of services in-house and by associates. No worries, you are in good hands.
These planners do not require clients to have a minimum asset level to work with them and as a result, are beginning to move into the space traditionally serviced by financial coaches and counselors.
One example is Jason Reiman, who previously held a financial coaching certification through the AFCPE and is currently a CFP® and an enrolled agent. He said, “I provide financial coaching and planning within my practice. Since the true value of a coach is the ability to bring out the very best in a person, I don’t think it would be sufficient to provide coaching and not planning, and vice versa, however we are a group of financial planners that is focusing on clients in generation X and Y – a demographic that may not have acquired much assets to date ”
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