Who Manages Your Money?

If you're looking to pay someone to invest your money for you, there are several types of professionals you can turn to. These include registered financial professionals, investment advisers, financial planners, insurance agents, accountants, and lawyers. Each of these professionals can help you with different aspects of your financial planning and investment needs. For example, registered financial professionals can buy and sell securities for their customers, while investment advisers provide advice about securities tailored to the needs of their clients. When choosing an investment professional, it's important to do your research, ask for recommendations from family and friends, and make sure the individual and their firm are registered.

Investment advisers provide advice about securities, tailored to the needs of their clients

People who are paid to invest on another person's behalf are typically called investment advisers, stockbrokers, or financial advisors. These professionals provide investment advice, which is any recommendation or guidance that educates or informs an investor about a particular investment product or series of products. Investment advisers are financial professionals who make investment recommendations or conduct security analysis in exchange for a fee. They are required to register at the state level and with the Securities and Exchange Commission (SEC) if they manage a certain amount of client assets.

The investment adviser has a fiduciary duty to their client, which means they are legally bound to act in their client's best interests. They must ensure that the client's transactions are given priority and that any recommendations made are well-suited to the client's needs and financial circumstances. To minimize any real or perceived conflicts of interest, investment advisers are compensated through fees, which aligns their success with that of their clients. For instance, an investment adviser might charge a management fee based on the performance of the client's assets, creating a financial incentive for the adviser to work towards the client's success.

Investment advisers often have discretionary authority, allowing them to act on behalf of their clients without obtaining prior formal permission. However, this authority must be formally granted by the client during the onboarding process. It is important for investors to understand the qualifications and potential conflicts of interest of the person dispensing investment advice. While investment advice can also be obtained from amateur sources, such as online blogs or conversations, it is generally recommended to seek guidance from qualified professionals who have a fiduciary responsibility to their clients.

Financial planners provide a range of financial services

People who are paid to invest on your behalf are called financial planners or financial advisors. Financial planners provide a range of financial services to their clients. They help clients manage their money and reach their long-term financial goals. Financial planners must have a thorough knowledge of personal finance, taxes, budgeting, and investing. They may specialize in tax planning, asset allocation, risk management, retirement planning, or estate planning.

Financial planners work with individuals, families, and corporations to help them manage their current money needs and long-term financial goals. They take inventory of their client's finances and create a plan to help them reach their goals. This involves assessing their client's financial situation, understanding their goals, and creating a plan to help them achieve those goals.

Financial planners offer a range of services, including:

• Budgeting: They help clients manage their money and reduce spending.
• Investing: They advise clients on investment options and asset allocation based on their risk tolerance.
• Retirement planning: They help clients determine how much to save for retirement and advise on investment options.
• Insurance planning: They help clients understand their insurance needs and ensure they have the necessary coverage.
• Tax planning: They optimize tax strategies, maximize deductions, and help clients understand the tax implications of different financial decisions.
• Estate planning: They assist clients in preparing a will, trusts, and powers of attorney to ensure the orderly transfer of assets after their death.

Financial planners can be categorized into robo-advisors, online planning services, and traditional, in-person planners. Robo-advisors provide automated investment management services, using computer algorithms to build and manage a portfolio of low-cost investments. Online planning services offer a combination of computer-driven portfolio management and access to human financial planners via phone or video conference. Traditional, in-person financial planners provide holistic, one-on-one advice, often holding the CFP (Certified Financial Planner) designation, which indicates rigorous training and testing.

When choosing a financial planner, it is important to consider their credentials, disciplinary history, and specialization. While anyone can call themselves a financial planner, designations like CFP, CPA (Certified Public Accountant), and CFA (Chartered Financial Analyst) indicate specialized knowledge and qualifications. It is also crucial to ask if they are a fiduciary, as this means they are legally bound to act in their client's best interests.

Insurance agents sell insurance policies and other insurance products

People who are paid to invest on your behalf are known as investment professionals. One such professional is an insurance agent, who can help individuals and companies obtain insurance policies and other insurance-related products.

Insurance agents sell insurance policies, such as life, health, property, and casualty insurance. They may also sell insurance with an investment element, such as variable products insurance, or other financial products like variable annuities.

There are two main types of insurance agent: captive agents and independent agents. Captive agents work for a specific insurance company and can only sell the policies and products offered by that company. Independent agents, on the other hand, can represent multiple companies and typically try to find insurance policies that offer the best coverage for the client's circumstances. Independent agents usually earn larger commissions than captive agents.

Insurance agents are licensed by the state in which they work and must comply with sales and marketing rules. In the United States, insurance agents who sell products considered securities, such as variable annuity contracts or variable life insurance policies, must also be licensed as registered financial professionals and comply with FINRA rules.

Selling insurance requires hard work, determination, networking, marketing, and a genuine interest in people's lives, plans, and future. It often means working on commission and having at least one insurance license. To earn a license, an agent must be at least 18 years old, pass an exam, and pass a background check. Many states also require pre-licensing education.

Insurance agents perform a variety of tasks, including contacting potential clients, interviewing clients to understand their financial situation, explaining insurance policies, analyzing clients' current policies, and handling policy sales and renewals. They may also assist clients with the insurance claims process and help them choose the most suitable plans.

Accountants provide assistance with taxes, financial planning, and auditing

Accountants are financial professionals who provide a range of services, including assistance with taxes, financial planning, and auditing. They are trained to help individuals and businesses navigate complex tax and financial matters, ensuring compliance with regulations and optimizing financial decisions.

Taxes

Accountants play a crucial role in tax preparation and reporting. They help individuals and businesses compute and file their tax returns accurately and on time. This includes computing taxes owed, ensuring timely payment, and complying with tax laws and regulations. For instance, a Certified Public Accountant (CPA) can advise on the tax implications of financial decisions and assist with annual tax returns.

Financial Planning

Accountants also offer financial planning services, helping clients assess their overall financial situation, develop budgets, and set savings and investment goals. Some CPAs are certified as Personal Financial Specialists (PFSs), which means they have met the educational requirements to provide financial planning advice. This includes guiding clients on topics such as cash flow, insurance, retirement, and wealth transfer planning to achieve their financial objectives.

Auditing

Auditing is another key area where accountants provide valuable assistance. Auditing involves examining financial statements and records to ensure accuracy and compliance with accounting standards and regulations. Accountants may specialize in internal or external audits. Internal auditors work for the organization, identifying ways to improve processes and mitigate financial risks, while external auditors work independently to evaluate financial records and provide objective opinions on their accuracy and completeness.

Overall, accountants are trusted advisors who assist individuals and businesses in making sense of their financial situations, ensuring compliance with tax laws, and making informed financial decisions to achieve their goals. By leveraging their expertise in taxes, financial planning, and auditing, accountants play a vital role in helping their clients maintain financial health and security.

Lawyers offer legal assistance with financial planning and investment decisions

Lawyers, especially those in private practice, often face unique financial challenges. They may start their careers with a large amount of educational debt, and many have additional financial obligations such as mortgage payments. This can result in a significant amount of monthly expenses, which may be difficult to manage without proper financial planning.

Attorneys work long hours, often between 60 and 80 hours a week, leaving them with little time to focus on their own financial situations. As a result, lawyers may benefit from seeking legal assistance with financial planning and investment decisions.

Financial advisors can help lawyers address their complex financial circumstances. They can conduct a cash flow analysis to optimize income allocation for expenses, debt payments, and long-term savings. For instance, they can advise on accelerating payments for loans with higher interest rates. Financial advisors can also assist in evaluating insurance options, such as malpractice insurance, and help attorneys choose the most suitable coverage for their needs.

Additionally, financial planners can provide investment guidance that aligns with an attorney's risk tolerance and financial objectives. They can recommend asset allocation strategies and assist in executing a diversified investment plan. As lawyers advance in their careers and their tax situations become more complex, financial planners can also work with their CPAs to develop tax-efficient strategies for liquidating company stock or partnership shares.

Furthermore, financial planners can aid in protecting personal assets by recommending strategies to shield savings and investment assets from potential legal judgments or creditor claims. This may involve establishing trusts or developing comprehensive estate plans to ensure efficient wealth transfer to heirs.

Overall, financial planning services can help lawyers address their unique financial challenges, make informed investment decisions, and build long-term financial security.

Frequently asked questions