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How To Pick A Money Pro

The expanse of personal finance experts is so dizzying and convoluted that even Sheldon wouldn't want to decode it. It doesn't take a PhD to know that if you earn interest on your money, you'll end up with more than you start with. But considering the average american makes 6 to 10 money-based choices a day, how do you find someone to help guide you with all those decisions? Do you need a Financial Planner, Advisor, Counselor, Hedge Fund Manager or all of the above?! And which one do you talk to about insurance, taxes, your 401k or small business questions? Does a Personal Finance "Go-To" exist??

Good to know

There's a buzz word in the industry called 'Fiduciary Standard'. It's a strange word but what it means is that an advisor with fiduciary responsibility must act in the best interest of their client, putting their client's interest ahead of their own at all times. Now you would think that anyone managing someones hard earned savings would have to abide by these standards, right? WRONG! The majority of financial professionals out there do not have to follow this principle. WTF!

A lot of the stockbrokers and advisors at firms like Merrill Lynch, Morgan Stanley, Fidelity, etc do not have a fiduciary duty to their clients. Instead, they fall under what's known as the 'Suitability Standard'. This means that as long as they can justify that a particular product is suitable for their client's situation, they can sell it to them - even if it's more expensive and pays them a fatter commission. 

Source: Carl Richards -http://www.behaviorgap.com

Source: Carl Richards -http://www.behaviorgap.com

To circumnavigate the unnecessarily confusing and numerous distinctions, licenses and certifications of the Financial Services Industry, we've put together a dictionary-style summary to boil it down to what you need to know. If you like being confused, go watch Inception...again.

Money Professionals: DEFINED

Stockbrokers: The "old" Wall Street. Who your parents hired back in the dark ages because it was the only way they could get access to the stock market. This was obviously before the existence of the internet and online trading. You may remember them calling this person up to get an update on their portfolio performance.

Financial Advisors: This is a generic term that can be used by anyone who doles out advice on subjects that range from taxes to investment advice. You'd need to do a little more digging to find out how a particular financial advisor works (how they are compensated will tell you how they are incentivized). Most work at a large broker/dealer (like the Merrills/Morgans of the world) and fall under the Suitability Standard & make money when they sell you products or trade your account.

Financial Planners: This is a tricky one. You may have heard the term CFP (Certified Financial Planner) before. We have some beef with this designation. A lot of the large firms, pay for their Financial Advisors to take the course, corresponding exam and then tack these letters on to their business cards. It definitely looks good but from our experience, these are mostly just "sales people" who are incentivized to achieve this designation but don't actually practice financial planning. Be sure to ask about their process before hiring one.

Investment Advisors/Asset Managers: A lot of the new robo-advisors like Wealthfront, Learnvest and Personal Capital would fall under this category. They take your savings and invest it for you, not always with a goal in mind. Investing for the sake of investing is a slippery slope. It's good to have goals in mind when you decide to start investing. We always get the "I have X dollars to invest, what should I buy?" It's not that simple and for a good reason. If someone answers that question without asking you any follow up questions, beware. That's called gambling.

Registered Investment Advisors: This term doesn't refer to a person or job function but a type of firm whose advisors fall under the Fiduciary Standard to serve in their client's best interest (see Fiduciary Standard above). There are numerous RIAs out there and each might focus on a different type of client, some serving high net worth individuals, some serving doctors, others working only with female entrepreneurs, etc.

SO WHICH ONE DO I NEED?

The list doesn't end there, but for the sake of keeping this short (ha!) and sweet, let's discuss the inherent question, "so which one do I need?"... 

Before hiring a financial pro, you want to verify that they are a fee-only advisor. You also want to make sure they have an obligation to act in your best interest (known as the Fiduciary Standard). You want this because it means their interests are aligned with yours. It would also be good to know if they sell product created by the firm they work for (i.e. proprietary product).

At Stash, we start by helping you create a plan that defines what you want in life. We call it goals-based planning, which means you figure out what you're saving and investing FOR and let those goals dictate what you should be investing IN. The investments become the solution to your needs, wants and wishes. Wall Street loves to take your money and put it in the market because that's how they get paid. Finding someone who gets paid to help you achieve your goals seems to make a lot more sense to us - what do you think? Comment with your experience, positive or negative, to help our readers get a better sense of their options when hiring a personal finance professional.

 

 

 

Priya @ MC

Stash Wealth, 142 N 6th St, Brooklyn, NY, 11249, United States

Priya Malani left Wall Street to reestablish a new norm for what it meant to work with a Financial Advisor. As a Registered Investment Advisor based in New York, Stash Wealth educates and empowers Millennials and Gen Y'ers to take control of their financial future. Stash Wealth hosts monthly talks on personal finance topics called Financial Cliffnotes: LIVE. Also, it puts out a biweekly Financial Cliffnotes Newsletter. On the planning side, Moderna Capital has found the best way to execute successful financial plans is to deliver them in bite size pieces rather than the industry norm (one hefty document) that only leaves the client further confused and overwhelmed. By delivering modular planning on topics relevant to the needs of this generation, Stash Wealth helps individuals and couples secure their financial future and end the guilt that comes with not knowing where they stand.