18 Oct 2016

Choosing the Right Kind of Financial Advisor for You

Choosing the Right Kind of Financial Advisor for You

If you’re drowning in student debt and seeking help, knowing who to turn to for advice is a big piece of the puzzle.  There is a lot of information on the internet, and sometimes friends and family are all too willing to give advice. But working with a professional can help you cut through the chaos and obtain the most reliable, timely financial information and guidance.  

But what kind of financial advisor?  Most people don’t know that there are many different types or that they work best in a variety of circumstances.  Below, I describe the three most relevant types for APA members – financial planners, financial counselors and coaches, and financial therapists – and outline some of the key similarities and differences. 

Financial Planners

Financial planners typically take a proactive, future-oriented approach to advising clients.  The most commonly recognized financial planning certification is the Certified Financial Planner® designation, or CFP® for short. CFP® professionals are knowledgeable about a range of financial topics – including investments, insurance, taxes, retirement and estate planning – and can help direct clients toward specific financial goals and outcomes.

Financial planners typically work with clients over the long term and often seek to develop deep, lifetime relationships. Some charge for their services on an hourly basis, while some sell products, and others are fee only. Most financial planners are looking for clients with investable assets (beyond a house or a retirement account).

It is always wise to interview multiple financial planner candidates and to ask a variety of questions, like those found here.

For more information on how to work with a financial planner, go to letsmakeaplan.org.

Financial Counselors and Coaches

While financial planners seek to serve clients over their lifetime and address a variety of topics, financial counselors typically have shorter engagements and concentrate on helping clients become more self-reliant and independent. Their goal is not to plan out a client’s financial future, but instead to help them face more immediate challenges, such as tackling student loans or making wise credit decisions.

In addition to helping to resolve problems, financial counselors typically assist clients with the day-to-day management of finances, including budgeting, debt and credit, and changing negative behaviors.

Financial coaches are becoming more commonplace. Coaches focus on helping clients find solutions and are aimed at optimizing behaviors. Like financial planners, they typically follow more of an advisory model and provide encouragement and support for behavioral changes. They also seek to develop long-term relationships but with an eye to keeping clients engaged.

More information on both financial counselors and coaches can be found at www.afcpe.org.

Financial Therapist

For some people, managing personal financial health goes beyond simply managing money. For example, there might be recurring emotional issues – ranging from family/marital problems to various addictions – that hinder a person’s ability to make informed financial decisions. In these kinds of situations, a financial therapist can be helpful.

Financial therapists often have backgrounds in both financial counseling and therapy. As such, they look to understand their clients’ underlying behavior and attitudes toward money, which they can then leverage to help address specific financial problems.  They consider a client’s beliefs, behaviors, and relationship dynamics and can help with both proactive and remedial financial situations. They take into account financial matters as well as psychological and systemic impediments to financial well-being.

While finances are a key component of discussions with a financial therapist, often times a client may discuss emotional issues with the therapist first before addressing his or her specific financial situation. Financial therapists focus on helping clients become more independent and engaged with their finances.

For more information on financial therapy, visit www.financialtherapyassociation.org.

Helpful Tips

Whether you choose a financial planner, counselor, coach, or therapist, be sure to interview at least three candidates before choosing one. Financial advisors offer a range of approaches and methods; it is helpful in the long run to do your homework and find the one that best fits your needs. Once you have chosen an advisor, be sure to prepare all of the appropriate documents – including your monthly budget, net worth statement, and debt history – before your first appointment, so that you are ready to have an honest and transparent conversation about your financial situation.

Regardless of which kind of expert you decide to engage, keep in mind that tackling the problem or question now is always better than ignoring it and hoping the situation will resolve itself. Reach out and get help today!

Dr. Mary Bell Carlson, PhD, CFP® , AFC® is a professional Financial Therapist, Principal of Silverbell Solutions, LLC. Visit www.silverbellsolutions.org for more information.

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