How to choose your perfect financial advisor
If you are new to investing or need specific help planning for the future, you should seek a professional opinion. So, wWhat are the different types of financial advisors and how do you choose the one that is best for you?
Do you need a financial advisor? Hear what’s right for you:
What you should know about financial advisors
In this episode the Queer Money® In the podcast, I address Zack’s question about the different types of financial advisors. I share the results of Queer Money’s Facebook survey on using a financial advisor and explain what you need to know about a fee-based advisor versus a fee-based advisor.
I then discuss the characteristics of a fiduciary and non-fiduciary advisor, describing which advisor must put your best interests first and what you can learn about a potential financial advisor from their Uniform Application for Investment Registration, or ADV, form. Listen in to understand the differences between a robo-advisor, an online advisor, and a traditional advisor, and how to choose a company that supports the LGBTQ community!
Data has shown that over time, financial advisors tend to perform better when the market is down and not as well when the market is up.Click to tweet
Topics for Choosing a Financial Advisor
The results of the Facebook survey on the use of a financial advisor
24 do it alone
18 curious about using one
9 now have one
What you need to know about fee-based financial advisors
Paid by customers only (flat fee, hourly or % of AUM)
Cannot be paid by fund companies or referrals
No commission can be earned for product recommendations
Typically acts as a trustee
What you need to know about fee-based financial advisors
Can be paid by clients AND fund companies or referrals
Can earn commissions for product recommendations
Typically not acting as a trustee
Why you need to ask potential financial advisors about their ADV
Explains services, fee schedule, conflicts of interest, etc.
Describes educational and business background
The characteristics of an advisor acting as a fiduciary
Put your customers’ well-being before your own
Avoid/disclose potential conflicts of interest
Provide relevant facts and accurate advice
What makes a non-fiduciary financial advisor?
Still required to meet customer suitability rule
May be more loyal to the broker-dealer than to the customer
Less stringent rules for disclosing conflicts of interest
The pros and cons of using a robo-advisor
Lowest barrier to entry, low management fees
No to minimal human contact (online survey)
Best if you are just starting to invest
The pros and cons of using an online consultant
Low barrier to entry, open from $0 to $25,000
Moderate management fees (0.25% to 1%)
Human contact varies depending on fees paid
Best if you are starting out and have money to invest
The Pros and Cons of Using a Traditional Advisor
Highest barrier to entry, minimum $100,000
Management fees 1% or more (graduated fee scale)
A dedicated consultant offers holistic advice
Best suited for those who want to invest a lot of money and have special needs
How to choose an LGBTQ-friendly financial advisor
- Research which companies you want to work with
- Check membership in the local LGBT Chamber of Commerce