Myth 1: You have to meet strict requirements before calling yourself a financial advisor or financial planner.
There aren’t any requirements to meet before you can call yourself an “advisor” or “planner”, so don't assume that someone using the title "financial advisor" or "financial planner" has the necessary qualifications to "advise" or "plan" anything! Most people that use those terms are really just salespeople.
If you want to make sure your financial advisor has proven qualifications, then look for someone with the CERTIFIED FINANCIAL PLANNER(TM), or CFP® , designation. These individuals have put in hundreds of hours studying for an intense two-day examination, undergone background checks, agreed to a abide by a code of ethics, and are subject to continuing education requirements.
Myth 2: A financial advisor will try to sell me something.
Most advisors do earn their living by “selling” investments and insurance products and have to get there clients to buy something in order to make money. This can lead to conflicts of interest.
You can eliminate this conflict of interest and make sure your advisor is focused on “advice” rather than “sales” by working with a fee-only advisor that doesn’t accept commissions from his or her recommendations. This places the focus on advice rather than sales.
Myth 3: My financial advisor does my planning for free.
There’s no such thing as a free lunch. An advisor that does “free” planning likely earns commissions from his or her recommendations. While commissions aren’t inherently bad, they can lead an advisor to recommend something that might be better for his or her pocket than yours.
A lot of the products that are recommended as the result of "free" financial advice carry high commissions, fees, and surrender charges that can negatively impact your future investment returns. On the other had, fee-only advisors that charge for their advice and don't have any financial incentives to recommend one product over another, are free to recommend the best, lowest cost alternative to you.
Since "free" planning can end up costing you thousands more over time, make sure you focus on the "total cost" of your financial planner's advice rather than only focusing on what you pay out-of-pocket.
Myth 4: My financial advisor has to put my interests first.
Only advisors that are held to a “fiduciary” standard are legally required to put your interests first. Although they are prohibited from using deceptive sales practices, brokers and insurance agents are not held to a fiduciary standard.
Unlike other financial advisors, Registered Investment Advisors are held to a fiduciary standard and are legally obligated to put their clients' interest above their interests and the interests of their firm. Go to www.FocusOnFiducuiary.com to lean about the fiduciary standard and why it's important.
Myth 5: Only wealthy people need financial advisors.
If anything, people that aren’t already wealthy need sound financial advice because they can’t afford to make mistakes with their money and a financial planner can help them avoid costly mistakes and stay on the right track financially.
While many financial advisors focus on attracting only wealthy clients, there are many top-notch advisors that reach out to the "middle market". Look for a fee-only advisor that works on an hourly basis, since an advisor that bills for his or her time is less likely to care about your net worth or investable assets.
Go to www.GarrettPlanningNetwork.com to find a fee-only advisor that bills on an hourly basis near you.
Myth 6: “Fee-only” and “fee-based” advisors are the same.
These terms aren’t interchangeable! Don't be fooled by Wall Street's attempt to blur the line between "fee-only" and "fee-based"!
“Fee-based” should really be called “fees and commissions” since fee-based advisors earn a fee when you hire them and receive commissions from the products they recommend (read: "sell")! On the other hand, fee-only advisors never receive commissions from their recommendations, so this huge conflict of interest is removed.
Myth 7: A financial advisor looks at all areas of my finances.
Many advisors only look at a limited area of your finances – like investments or insurance – so if you want a comprehensive planning, it’s important to find an advisor that has the appropriate qualifications and experience to analyze all areas of your finances, from cash flow, to retirement, tax, and estate planning.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
