Financial Advisor Services
There are five primary types of financial advice and services (also known as Wealth Management). You may need one service or all five services.
Watch-out for advisors who claim to be experts in multiple disciplines. Some advisors make this claim to generate more revenue streams per client. Each of the services requires extensive, specialized knowledge to provide advice you can depend on.
Real advisors provide expert advice and ongoing services for fees. Fake advisors sell investment and insurance products for commission. For example, a commission-only insurance agent may provide planning services to help him sell insurance products.
Think of planning services as your financial roadmap. Where are you going and how are you going to get there.
There are five primary types of planning services: Financial, tax, retirement, estate, and charitable plans. Some plans are integrated, for example financial and retirement. Some plans are stand-alone, for example charitable.
A high percentage of financial plans are scams. Cheap software produces plans that are designed to sell investment and insurance products.
There are several investment services that are provided by three types of professionals and firms:
- Money Managers nvest your assets in the securities markets
- Financial Advisors develop investment strategy, allocate assets, recommend money managers, and provide performance measurement reports
- Sales Representatives sell investment products (mutual funds) for commission.
A high percentage of advisors are dual licensed so they can provide insurance advice and sell insurance products: Life, annuity, long-term care, health, disability, and so on.
The AICPA says 35% of CPAs provide financial advice and services. Consequently, there is a good chance your CPA is also in the financial advice business. Financial advice is usually limited to planning and/or investment services.
Conversely, a small percentage of financial advisors provide tax advice and services. When they do, they may be affiliated with CPAs who are tax experts.
A smaller number of advisors provide legal advice and services. When they do, they focus on asset related services: Estate plans, wills, trusts, and probate. Similar to CPAs, a large number of advisors are affiliated with attorneys who provide these types of specialized services.
You should require advisors to document their sources of expertise. Do not accept undocumented sales claims.