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Finding the Right Financial Advisor

How much should they really cost?  

 

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Financial advisors can be invaluable when it comes to wealth management. Financial advisors can offer advice, make financial decisions for you, and help to grow your wealth for retirement and other pressing life needs. While financial advisors are invaluable, not all advisors are created equally. Pricing, expertise, and portfolio strengths differ from advisor to advisor, so before you pick one, it is a good idea to better understand the type of advisors available and how much they really cost.

The Two Types of Advisors

There are generally two types of financial advisors for wealth management—brokers and registered investment advisors. The type of advisor you need will largely depend on you, the investor, and the type of help you are looking for, but let’s start with the type of advisors you’ll run into on your search.

Brokers are advisors who broker deals and manage the portfolio of their investors. They are generally paid a percentage of your investments, ranging from .75% to 1.25%. A lot goes into figuring out the percentage that the broker receives, and not all brokers charge the same percentage. On average, however, the more you have in investments the lower the percentage you pay.

Registered investment advisors are more like consultants. They are individuals who can give you advice on the right type of investments for your financial situation and will help with the allocation of assets, but they stop short of managing your portfolio and buying and selling assets. Instead, they give guidance that will help you grow your wealth. Registered investment advisors generally charge a flat fee, or a per hour rate. Flat fees can range anywhere from $1,000 to $3,000. The hourly rate can range from $200 per hour up to $500 per hour, depending on the advisor, their background and experience, and the type of wealth management help you are seeking.

The Two Types of Investors

Just like there is more than one type of advisor, there is more than one type of investor. Investors generally fall into two categories, as well—the self-directed investor and the hands-off investor.

Self-directed investors generally have more knowledge of the stock market and how investments work. These are investors who plan to manage their own portfolio and make their own decisions about what assets to buy and when. They utilize the help of a financial advisor to simply look over their portfolio and make suggestions based on risk analysis and the current financial climate. If you are this type of investor you’ll want to utilize the services of a registered investment advisor.

Hands-off investors tend to be individuals who are less knowledgeable about financial matters and investments. Instead of doing the legwork and picking investments, they prefer to have an advisor do the research and build a portfolio that works for their financial goals. This type of investor generally trusts that the expert will make decisions that will help grow their financial wealth while they, the investor, don’t have to think about it. If you are this type of investor you are likely in the market for an investment broker and can expect to pay a percentage of your investments to the broker.

How to Pick the Right Advisor

Finding an advisor is about more than simply picking the suitable type of financial advisor. You, as an investor, must feel comfortable with the advisor and the decisions they are making for you. You’ll want to look for an investor who is willing to consult with you prior to you making your final decision. When you meet with your potential financial advisor you should check to see how often they plan to check in with you, and how often they’ll review your portfolio. You should pick an investor that you feel connects with your situation and goals, and has your financial health in clear focus. Once you pick an investor, make sure to check in periodically to see how your investments are doing and inform them of any life changes that may affect your financial goals.

 Contact an IB Wealth Management Representative

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