Can one individual or organization cover my complete spectrum of financial concerns, including investment diversification and maximum returns, income tax optimization, required minimum distribution (RMD) management, and steady income cash flow? Is there a good way to survey fiduciary candidates and compare expertise, performance and costs?
Navigating your finances can be tricky, and enlisting a professional can help you make the most of your money.
Choosing a financial professional, however, can feel overwhelming. There are several different types of financial advisors, and they all bring different skills and experience to the table. Wading through your options to pick an advisor or team of advisors takes a little due diligence. But having reliable, proactive pros on your side will be worth it. (This tool can help match you with potential advisors so you can decide which one is right for you.)
Can One Advisor or Firm Do It All?
While one advisor usually won't have expertise in every aspect of personal finance, there are umbrella firms that combine professionals for a sort of one-stop shop. Within these firms, you can find attorneys, tax preparers, investment advisors and financial planners, so your team will be under one company's roof.
If you don't feel comfortable having all your advisors in one basket, you can assemble your own team based on your specific needs. For example, an investment advisor can help you preserve and grow your wealth while a certified public accountant (CPA) can help determine your RMD requirements, do tax planning and outline potential tax consequences of financial moves. A certified financial planner (CFP) can help you develop your retirement budget, so you know how much you do or don't need to pull from retirement accounts. And an estate planning attorney will help you create a will, prepare financial and medical powers of attorney, and make sure your heirs will be protected after you're gone.
Whether you work with a single firm or several independent advisors, it's important to make sure that everyone is on the same page about your situation, goals and risk tolerance. Your advisors can coordinate – with your permission – to make sure every transaction is done in the most beneficial way. (Are you also on the hunt for a new financial advisor? (This tool can help match you with potential advisors so you can decide which one is right for you.)
Different Types of Financial Advisors
The term "financial advisor" is used to describe many different positions in the financial industry. But recent regulation from the U.S. Securities and Exchange Commission (SEC), called Regulation Best Interest (Reg BI), has limited who can use the title. Financial advisors generally are also registered investment advisors (RIAs) or investment advisor representatives.
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