In personal finance, there are an endless number of decisions to make. You have to choose the way you’ll make money, what you’ll do once you’ve earned it, and who you’ll go to when you need help with it.
Choosing the right financial professional can be confusing, too. Many of their titles and job descriptions are similar. Some also have special designations – all of which add to the complexity of deciding who you should go to for help.
There are 8 main types of financial professionals and this list will help you understand each of them. You’ll learn about what they do, the unique money skills they have, and how they get paid. By the end of this article, you’ll be able to determine which expert is right for your situation and the ones that can assist you in reaching your financial goals!
Most experts recommend that you have multiple types of insurance. They suggest having home insurance to keep your largest monthly expense safe, auto insurance to protect yourself in case of accidents, and health insurance to help you pay for medical treatment costs.
The insurance maze can be elaborate and complicated. Not only are there different types, but the policies contain all sorts of legalese, fine print, and conditions which only adds to the complexity!
To help you navigate the world of insurance, your best bet is to hire an agent. This financial professional assists you in determining the type and amount of insurance that’s right for you. They can also help you shop amongst providers and tell you which one offers the best deal!
Since insurance companies are forever changing their policies and coverage, finding someone who understands insurance is key. They can make sure you have adequate protection despite these changes and can help you fight insurance bill creep, too!
Most insurance agents are salesmen/saleswomen and they get paid a commission by the company whose products they sell. Typically, they make between 5 and 15% of the premium which incentivizes them to sell you more insurance than you need and highlights the importance of finding a trustworthy agent.
To find a good agent, start by asking your friends and family for referrals or by looking at reviews online. Once you’ve found a few candidates, call them and ask some basic questions. See what advice they give, which products they recommend, and their cost. Then, use this information to compare your quotes and coverage options to find the best overall deal.
Also, consider checking sites like PolicyGenius and Insurify to see if you can find additional savings by getting insurance online!
A CPA’s role is to guide you through the preparation and filing process of your annual tax return. They can give you tax advice and help you find deductions that you might not be aware of which reduces one of your top expenses – taxes!
Most people only contact a CPA once per year, usually around tax time. But, CPAs can help you create personalized tax strategies throughout the year. They can advise you on the right time to realize financial gains and make charitable contributions; both of which can affect your tax liability.
CPAs are also helpful to business owners. They assist in tracking a company’s income and expenses and can prepare financial statements. These documents help business owners raise money, get loans, and further expand their company’s reach!
Most CPAs charge based on the amount of work that’s involved and the level of service that you need to get your tax return filed. Typically, their prices range from a few hundred dollars to several thousand. The more complex your financial situation is, the more you should expect to pay.
But, not everyone needs a CPA. If your sole income type is from a W-2 job or if it’s early in your wealth-building journey, then you can probably file on your own. Another option would be to using tax software to ensure you aren’t missing out on any deductions and are saving the most amount possible!
Many people don’t think that attorneys as financial professionals, but they are and can help you in many different areas of your financial life. A few common services they provide are:
Most attorneys specialize in one field of law. So, in order to avoid wasting money you’ll need to select the one that best fits your needs.
It’s common for attorneys to charge either a flat fee or an hourly rate. Flat fees will vary based on the service you’re requesting while you can expect to pay around $225 per hour if you need them continually.
Depending on your needs and the details of your financial position, there are a few websites that can help you save money on attorneys’ fees. Consider using sites like LegalZoom or Trust & Will. They both have standard non-customizable forms and can offer substantial savings!
These financial professionals provide you with potential investment opportunities and give you advice about them. Their recommendations are tailored to fit your needs, investment strategy, and financial goals!
Registered investment advisors (RIAs) are registered with the SEC and state regulatory agencies. They have a fiduciary duty to their clients which legally requires them to disclose all conflicts of interest and always put their clients’ interests first!
Since RIAs are fiduciaries, many of their clients give them a certain degree of freedom. Often, these financial professionals can buy and sell securities within a particular set of guidelines without even needing to get their client’s permission!
Registered investment advisors are fiduciaries and their pay structure is aligned with their client’s best interest. Typically, their pay is linked to your performance. The better you do, the more they make which incentivizes them to help you create wealth.
Most RIAs charge based on the amount of money they manage for you while some may charge flat fees. You can expect to pay around 1% of the assets they manage for you per year. It’s common to pay additional fees for special advice, research, and any reports they provide you with, too.
As an alternative to RIAs, many people just invest in passively managed index funds. Most of these funds have ultra-low total expense ratios which allow you to keep and grow more of your principal investment. Also, some DIY investors use discount brokerages and Robo Advisors which can both help you save money!
It’s a common misconception that financial advisors (aka stock brokers) and registered investment advisors are the same financial professional. However, they’re not and are actually far from it!
For starters, financial advisors can put their interests above yours. They can recommend and sell you products that have large commissions as long as they can justify that it’s appropriate for you!
Putting their interests before yours may create a conflict of interest. If financial advisors are looking at two funds and one pays more than the other, which one do you think they’ll recommend?
Also, financial advisors are held to a lesser standard than registered investment advisors. They’re accountable to a suitability standard which means they only have to recommend products that are suitable for you. This leaves a lot open for interpretation which allows them to potentially sell you products that aren’t the best use of your money or even in your best interest!
There are four main ways that financial advisors make money. The first is through the fees they charge you for buying and selling securities or executing trades. Most of them make commissions off the funds they talk you into buying, too.
These financial professionals can also get paid based on the assets they have under management. But, it’s most common for them to make money from a combination of all these sources.
Financial advisors aren’t necessarily inferior to registered investment advisors. I’ve hired both and had a good experience with each. However, it’s important to understand that there is a huge difference between these two financial professionals and what their priorities can legally be!
You can also save money on financial advisors by investing in index funds and using Robo advisors. Both of these are lower-cost options and easy ways to simplify your finances, too.
However, if you are interested in Robo advisors, then consider M1 Finance and WealthFront. They both offer straightforward advice based on algorithms and require low initial investments to open your account.
In personal finance, a financial planner offers everything under one roof. They can help you with budgets, taxes, insurance, investments, retirement, and estate planning. It’s common for most of them to work closely with attorneys and other financial professionals to take care of all your other needs, too!
Any time you experience a major life event (like a birth, death, marriage, or divorce) you should consider meeting with a financial planner. They can help you make changes to your will, beneficiaries, and the way your estate gets handled. As your life changes, this financial professional helps you determine the best way for you and your family to financially move forward.
Most financial planners are full service and have several different job functions. Therefore, it’s common for them to charge you multiple ways based on the services you need and the agreement you have made.
For example, they may offer financial advice and sell you securities. So, it’s likely they earn commissions when they do. But, they also create complex financial plans and may charge you a flat rate for getting it set up.
Some people hire these financial professionals for special projects and ongoing work, too. Depending on the service you need and the expert’s specialty, you can expect to pay between $175 and $400 per hour.
However, it’s also possible to save money on the services offered by financial planners. Many banks and credit unions keep them on staff and may offer free consultations. Also, your employer or 401k provider may have financial planning options available as part of your benefits package.
Wealth managers are almost identical to financial planners. The main difference between them is that these financial professionals focus more on the needs of the rich and wealthy!
Often, wealth managers work with clients that are worth millions and have complex financial situations. It’s common for their clients to have alternative assets, several businesses, and other legal entities, like trusts. All these individual components are interrelated to one another and changes in one can affect the others. Without proper planning, their clients could potentially waste a large amount of money on needless expenses!
Wealth managers are knowledgeable in a variety of financial disciplines and are responsible for the big picture. They understand how each piece of their client’s financial puzzle fits together and the best ways to form synergies between them.
Like financial planners, wealth managers offer complete financial solutions to their clients. They can get paid in a variety of ways, too.
The most common pay structure is based on the amount of assets they have under management. Typically, their fees start at 1% of assets under management (AUM) per year. And if you have a massive net worth, they’ll likely cut you a deal and make their services more economical!
All the previous financial professionals on this list primarily focus on which products you should buy or where to invest your resources. Whereas, a money coach (aka financial coach or money mentor) is different in that they specialize in your behavior and relationship with money.
Financial coaches examine the way you use money. They look at your habits, beliefs, and mindset which all shape the way you earn, spend, save, and invest your resources. Sometimes a simple, yet not so obvious change is all that’s needed to make large gains!
Money coaches are non-judgmental and tend to put more emphasis on helping you become self-sufficient than most other financial professionals. They teach you money skills that empower you to have a breakthrough and feel confident to make decisions on your own. This independence allows you to save more money and put it towards reaching your long-term goals!
Many people hire a money coach because they feel like their finances have gotten out of control. Often, they’ve been spending emotionally, have gotten deep into debt, and are looking for a way out. Others hire money mentors to get a second opinion on their financial situation or to create a plan for achieving early financial freedom!
A money coach can help you:
Most money coaches offer a free initial appointment. During the meeting, they’ll explain how they can help you and a few of the steps you may need to take.
After the free call, you’ll typically pay a flat fee for your first coaching session. During this time, your most pressing questions get answered and urgent problems solved. But, it’s also important to realize that years of financial abuse can’t get corrected overnight.
Luckily, most money coaches offer ongoing coaching sessions. when you buy them in bulk or sign up for a monthly coaching package, you’ll get a discount and save!
Keep in mind that there’s nothing wrong with getting help or advice when you need it. This is how you learn, grow, and improve!
I’ve been studying personal finance for decades and consider myself quite knowledgeable on the subject. Even still, I realize I have limitations and therefore have no problem seeking out financial professionals’ help when I need it.
It may seem like many financial professionals have a big price tag, but once you find the right ones, they’ll be well worth their fees. They’ll save you time and money, allowing you to live the life of your dreams faster!
Which financial professionals job description surprises you the most? Comment below.
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