Many Americans rely on expert financial advisors for guidance on retirement, tax planning, investing and other important matters. In fact, studies show that Americans feel happier and more confident in their finances when they have professionals guiding them. But not all financial experts are created equal. In fact, many experts have hidden conflicts of interest that taint their advice.
There are different types of experts who can help you manage your finances, from financial planners to investment advisors to brokers to robo advisors. Each type of professional has their own qualifications and compensation structures, and each has a different set of duties. Consumers should look for well-recognized credentials such as a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designation. These credentials indicate that an individual has mastered a body of knowledge, passed comprehensive examinations and agreed to abide by a code of ethics. Consumers can verify an advisor’s credentials at the CFP Board’s site or the CFA Institute’s site.
Conflicts of interest are common in the industry, and navigating them can be difficult for consumers. For example, financial experts who recommend certain investment products that have hefty sales commissions built into their prices are not serving their clients in the best way. These advisers may be able to hide these fees and commissions from the public, but the costs are real. Over time, these conflicts of interest can cost investors tens or even hundreds of thousands of dollars.
Another example of conflicts of interest involves advisors who sell annuities. Annuities are financial products that are meant to provide a steady stream of income during retirement or in the event of a long-term care crisis. Often, the advisers who sell annuities have large sales commissions built into their pricing. This creates a conflict of interest because the adviser is receiving a big commission while the client is paying the full price of the product.
The bottom line is that if you want to find an expert expert financial advisors to work with, look for someone who has your best interests in mind. The most effective experts are those who are fee-only and paid only by their clients, so they don’t have any third-party incentives that may taint their advice.
A financial planner can help you make a plan for your whole life and can guide you through the complex process of investing, taxes, insurance and more. They can help you create a budget, track your spending and develop a savings plan. They can also evaluate your withholdings to make sure you are getting all the money you’re supposed to get on each paycheck.
You can find financial experts online and in magazines such as the Kiplinger Personal Finance Magazine, a subscription-based publication with articles on investing, insurance, taxes, retirement and small business. The Wall Street Journal, a daily newspaper with in-depth reporting and commentary on the latest financial news, is another good resource. Its WSJ Investor Edge blog offers commentary on new ideas in investing and the latest research on current trends in the markets.