How to pick your perfect financial advisor
If you’re new to investing or need specific help in planning for the future, you may want to seek out a professional opinion. So, what are the different types of financial advisors and how do you pick the one that’s best for you?
Do you need a financial advisor? Hear which is right for you:
What you should know about the different types of financial advisors
On this episode of the Queer Money® podcast, I’m addressing Zack’s question about the different types of financial advisors. I share the results of the Queer Money Facebook poll on using a financial advisor and explain what you need to know about a fee-only versus a fee-based advisor.
I go on to discuss the characteristics of a fiduciary and non-fiduciary advisor, describing which one is required to put your best interests first and what you can learn about a prospective financial advisor from their Uniform Application for Investment Registration or ADV form. Listen in to understand the differences among a robo-advisor, an online advisor and a traditional advisor and learn how to choose a firm that supports the LGBTQ community!
Topics covered on picking a financial advisor
The results of the Facebook poll on using a financial advisor
- 24 do it on their own
- 18 curious about using one
- 9 have one now
What you need to know about fee-only financial advisors
- Only paid by clients (flat fee, hourly or % of AUM)
- Can’t be paid by fund companies or referrals
- Can’t earn commission on product recommendations
- Typically acts as fiduciary
What you need to know about fee-based financial advisors
- Can be paid by clients AND fund companies, referrals
- Can earn commission on product recommendations
- Typically not acting as fiduciary
Why you need to ask prospective financial advisors for their ADV
- Explains services, fee schedule, conflicts of interest, etc.
- Outlines educational and business background
The characteristics of an advisor acting as a fiduciary
- Put their client’s best interests before their own
- Avoid/disclose potential conflicts of interest
- Provide relevant facts, accurate advice
What characterizes a non-fiduciary financial advisor
- Still required to fulfill client suitability rule
- May be loyal to broker-dealer over client
- Less strict rules regarding disclosing conflicts of interest
The pros and cons of using a robo-advisor
- Lowest barrier to entry, low management fees
- Zero to minimal human contact (online survey)
- Best when just starting out with investing
The pros and cons of using an online advisor
- Low barrier to entry, open with $0 to $25K
- Moderate management fees (.25% to 1%)
- Human contact varies by fees paid
- Best when you’re starting + have $ to invest
The pros and cons of using a traditional advisor
- Highest barrier to entry, a minimum of $100K
- Management fees 1% or more (graduated fee scale)
- A dedicated advisor offers holistic advice
- Best for those with much $ to invest, specific needs
How to choose an LGBTQ-friendly financial advisor
- Research kinds of firms want to work with
- Check membership in local LGBT Chamber of Commerce