Confused about whether you need a financial advisor and the different types? Laura interviews Rita Cheng, CFP, from Blue Ocean Global Wealth and Finder.com about who should work with an advisor, how to find someone trustworthy, what fees are charged, and the differences between robo-advisors and financial advisors.

16 minute read

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Even if you don’t think you need a financial advisor right now, it’s really wise to understand the types of services they offer, how they get paid and how to check their background and any complaints filed against them. So I hope you’ll stay with me. I’ve got a great show coming up. Welcome to the money girl podcast. I’m Laura Adams, a leading personal finance and small business expert. And award-winning author. I’ve been hosting this show since 2008, and I am thrilled to have you as a listener, no matter what you want to achieve with your money. It all starts with financial education. That’s what this show is all about. It’s for everyone, no matter your age, who wants more financial wellness, knowledge tips, and down to earth practical advice. My goal is to help you live a healthy and rich life by making the most of what you have planning wisely for the future and making smart money decisions, being a wise money manager and building wealth is a marathon, not a sprint.

I always say that if you’re feeling frustrated about not being where you wanna be with your finances, or maybe even you’re doing great, but you have questions about things like credit debt, retirement, investing, insurance taxes, real estate, business, money, mindset, and lots more. You are in the right place. We cover all of those topics at money. Girl, thanks again so much for tuning in. I am really honored that you’re here. You’re taking your valuable time am to listen to today’s show. I’m really excited about it because I’ve got a great interview for you to get clarity on what you should know about working with a financial advisor. I interviewed Rita CFP. She’s the CEO of blue ocean global wealth, an investment advisory firm that strives to be a trusted partner and educational resource. Rita is also an editorial review board [email protected] A comparison site, helping consumers make better financial decisions.

I think you’ll enjoy our conversation and come away with a better understanding of what it’s like to work with an advisor. If you haven’t worked with one before and how to get started, we cover how your goals determine if you need an advisor and which type, if you need to be wealthy to work with an advisor, the different types of fees that charge who is an excellent candidate to work with a financial advisor. We talk about the differences between robo advisors and traditional financial advisors. We cover where to find potential advisors and how to check their backgrounds. And we suggest some questions that you should ask a potential financial advisor before working with them. All right. Here’s my conversation with Rita, Rita. Thank you so much for joining me on the podcast. I am really excited to talk about financial advisors.

Well, thank you so much for having me and I’m so excited to be here. First of all, tell me a little bit about you and your position. You’re the CEO of blue ocean global wealth. You’re also a CFP. So tell us a little bit about what that means. What is a CFP, first of all?

Sure. So IP so certified, we say the FP pro to earn CFP certification. I think it’s important to talk about the fours. So the first is there is an education requirements, curriculum, and topic areas that one must match. So that’s the first education in, then there’s an experience component. You do need to have experience working with clients that could even be on a pro bono basis. You know, if you’re doing this work for a community based organization, the third E would be examination. So once you, um, satisfy your education requirement, um, you can take the examination. And the last E which I think is really important is the ethics C FP certification is not one. And you’re done yes, passing the certification. Exam’s really important, but every two years, CFP professionals have 30 hours of continuing education. Two of which are, and that, and requirement on AAN basis. I am founder and CEO of blue ocean global wealth. We are a financial planning and investment advisory firm. What that means is we actually start with planning first, then talk about investments.

I love it. Okay. So if someone is listening and thinking, I’m not sure if I need a financial advisor or a planner, what would you, what advice would you give them to know? You know, even if they are really, let’s say suitable to work with an advisor or a planner, is there anybody who is unsuitable to work with a professional?

Well, I believe financial planning is for everybody, whether you’re leasing grad or youre, enjoying retirement, many times people use the terminology, financial advisor and financial planner. I mean, I’m a financial advisor who happens to be a financial planner, but I think it’s really important to first think about, you know, what help you want. And then you can ask them certain questions. So some topics to discuss is what services do you offer? So if you, as an example are wondering, you know, what is the best way to save for college and retirement at the same time? Yes, you need to invest your money, but you may want some financial planning advice. Do I save more for retirement? Have I saved up for college? The other thing that I think to think about is what is your approach? Do you wanna manage your money yourself or would you like have someone do that for you? So I think about what help are you looking for?

And then not only what are you looking for, but how you.

So let’s say someone is thinking, well, I’ve got a retirement plan at work and I don’t have that much money to invest. Maybe they’re not even maxing out their retirement plan at work, but you’re saying maybe they’re thinking about starting a family, or maybe they’re thinking about some other financial goals, maybe a it’s buying a home. You’re saying working with the financial planner could be a really good way to kind of look at the big picture of what your goals are and where you’re going. So have I got that right? A, a planner might be the first place to start in terms of your overall strategy.

You got it and is where things can get kind of confusing because people can pay for financial advice in several ways. Some people may pay a fee based on a percentage of investable assets, but if a lot of your money is in a 401k, that’s fee, a fee for fee a fee for advice. So I think it’s important to know that there’s different ways in which you can pay, uh, for advice and there’s different types of compensation models. So some advisors may earn a commission or sales related compensation. It’s not bad, but it’s important for you to know other people may receive compensation from percentage assets, owner management, and then last but not least people may, uh, receive compensation in the form of an hourly annual retainer or fee for the engagement.

Yeah. So that’s a lot to consider Rita. Another thing that may come up is people may see the term broker when they’re looking for an advisor, what is the difference between an advisor and a broker? How do you kind of think about those, those jobs? What kind of services do they provide? Um, that distinguish those two.

Sure. And this is a very important distinction. And when this up people like, oh my, that, so the world evolved, um, what I, you had stock brokers that would reach out to their clients and sell products. People still do that. But now with online trading, a lot of consumers investors can execute those trades on their own, but the biggest or distinction between a broker versus an investment advisor is this brokers, their advice is suitable, right? Whereas an investment advisor, they are held to a higher standard, which is the fiduciary standard and certified financial planners. We are held to fiduciary standard. This is really important. And so what does that mean? The distinctions, when something is suitable, you just need to make sure that that’s appropriate when something is in best interest. That means it’s consistent with the client unique, personal and financial circumstances. So being a fiduciary means that I, I put my client needs and priorities above mine versus just the advice being suitable.

Yeah. This is super important because basically what you’re saying is not all financial advisors are fiduciaries. So if you’re looking for someone who really is going to put your best interest first versus putting their own best interest first, such as making a high sales commission on a particular product that they recommend, if you want somebody to truly be looking out for you, you do need to sure that your advisor is a fiduciary. You mentioned online trading. And so this is something that we’re seeing a lot more of is robo advisors. What is a robo advisor? And, and how does that compare with the types of services you offer?

So robo advisors, um, Rob advisors are a type financial advisor, might, it could be that provide management with minimal human intervention, basically a broad based term that has the ability to provide investment advice at lower cost at scale.

Got it. So we’re talking about some online platforms, um, opportunities to, and invest money, but maybe not getting, uh, particular advice or any specific advice, uh, based on your needs. So would you say that’s kind of the main difference if you’re really looking for more personalized guidance, a robo advisor or platform may not be right for you, you know, you might want to consider working to with a, with a real human advisor. No, absolutely.

And you know what I have seen, I’ve actually seen younger clients and there could be some older clients, but I’ve actually seen this happen. Younger clients may want to work with a robo advisor for portfolio management, but they still wanna talk to a human being about other matters related to their personal finance. What do you, what’s the best way for me to pay my student loans. We’re getting ready to start a family. You know, how much life insurance do I need, you know, oh my goodness. Now that we’ve started our family, we are thinking we need more space. How do I buy that house? And so yes, you are 100% correct that robo advisors are gonna focus more on like the portfolio. But if you wanna have conversations about what’s, um, appropriate for your unique personal situation, that’s where customized individualized, um, financial place can make a lot of sense.

Before I start today’s show here’s some amazing news. Discover matches all the cash back. You earn on your credit card at the end of your first year. And what’s even more amazing is that discover is accepted at 99% of places in the us that take credit cards, learn more at discover.com/yes, 21 Nielsen report limitations apply. So I think when somebody is, is starting this whole process of, you know, how do I find an advisor? Do I need an advisor? What would you recommend are some good ways to, you know, just simply find somebody who’s right for you. I mean, certainly if you’ve got a friend or family member, who’s got a relationship with a financial advisor that they like and trust that may be a good place to start. Are there any other resources or ways to know? You know, if somebody truly is a good advisor, you know, how do you vet somebody? Um, what’s kind of the process that consumers should go through to make sure they’re gonna be dealing with somebody who’s trustworthy and reputable.

So the thing that I tell people ask for referrals, but personal finance is personal. And I even tell this to people who reach out to me just as much as somebody is interviewing me, I’m interviewing them. I don’t do day trading. I do planning first. I will not accept your money under management, unless we do planning. That’s just how I work. You may like that. You may not. So I tell people, ask for referrals and it’s talk to, or three people. I mean, I tell people, I want you talk to people that’s important. So I’m gonna share resources for listeners. The first one is let’s make a, there’s a lists that you planner and you can find a planner in your area. Another resource would be, so those are like directories and resources and questions you can ask. So I would, if fiduciary, but check their regulatory history, you can go Tora org, it’s called broker check. But it is basically for people who have FINRA licenses and you can check their another, if they do sell insurance as your state insurance. And, and then we have the SAC. And if they’re with a larger investment advisory firm, so resources to find a planner and then three resources to check the background on your planner.

That’s terrific. And I’ll put the links to those resources in the show notes that are the money girl [email protected] Um, so you can get right to them. So, Rita, I think that what we’re talking about is the fact that titles may not mean everything just because somebody calls themselves, let’s say a, a financial coach or a financial advisor. You really have to dig under the hood a little bit to figure out what is their designation? What is their specialty? What is their relationship to you? Is there a fiduciary relationship there and all of this does come back to what you mentioned at the beginning. What do you need, what are you looking for? Are you just looking for help with your tax return? Or are you looking for somebody to really, uh, create a plan, answer questions, you know, be kind of an ongoing resource for you? Um, so that’s something that, you know, each of us, we have to sort of decide on our own what we need. And then once we reach out to financial professionals, what would you say are some of the questions that, that we should be asking kind of right off the bat to understand if this is the right match?

Absolutely. So I think the fiduciary question is really helpful. Um, then I would say, what’s your, does this do offer method of compensation? How do you typically work with your clients? Um, I think the takeaway is consumers. Its OK. To be very particular about what you like and you can also say I don’t peoples, I, I don’t don’t so I that’s one of the questions I ask, you know, what are you hoping to get outta this relationship? If you’ve worked with another advisor in the past, what did you like? What didn’t you like? So you can see these are open ended questions and I get people to express themselves. So I would say that’s really helpful for your listeners.

That’s terrific. And when it comes to working with someone, do you think there is any downside to working with someone remotely versus somebody who let’s say is in your same town that you may have the opportunity, uh, to sit down with face to face maybe, you know, post COVID world will or will be meeting in offices again more frequently, but is there any downside in your mind to working to, with a client? Um, remotely,

I think that, you know, with zoom technology, client portals, my financial planning software, I can do a screen it’s safe and you can, don’t like zip could be a barrier. However, I certainly respect that. You may feel comfortable, you know, working with someone right in your community. That’s fine too. Um, but don’t let that alone, um, be a barrier to getting help because there’s lots of quality advisors who have the ability to serve you remotely.

Right. And it really does open up, you know, just a whole world of, of potential advisors. When you think about that, um, which, you know, may maybe make it a little bit more confusing for people. Sometimes more choices, uh, can be a barrier to making a decision, but I would really encourage people to think about this process and, and kind of making some baby steps toward it. You know, in a lot of cases, people need an advisor before they actually think they need an advisor, you know, by the time think, oh my gosh, like, you know, I need help. They really should have been talking to an advisor probably years prior to that situation. So it’s a good idea to kind of find an advisor earlier rather than later. And you may not, you know, need to have an ongoing communication with that advisor on a monthly basis.

But, but having that contact, knowing who that person is, them being familiar with your situation, like you said, Rita, there are so many aspects of a person’s life that goes into this personal financial advice, um, that they may be seeking. Um, having somebody who really knows you, who understand your situation and, and can help you with things like, should I take a new job, you know, should I, um, you know, make a big move here and there, um, that person will be available to you. So that’s my advice. I know a lot of people, including my parents who really waited until the last minute, I mean they were retired be before they wanted to find someone to manage their money and they were really scrambling and it’s something that they probably should have done decades earlier. Um, and fortunately they did find somebody, but I think they could have made a lot better decisions and choices leading up to retirement if they had been working with this person far in advance. So there’s definitely some advantages there to having somebody who knows you Rita, thank you so much for your advice. This has been really helpful. Um, I think this is gonna kind of cut through the confusion for a lot of people who maybe on the fence about using a financial advisor and hopefully make them feel a little bit more confident about that. Absolutely.

Thank you so much. And really what I want is for everybody to have the opportunity to gain clarity, confidence, and control over their financial clarity about the options available to them, the confidence to know that the they made are the ones that are right for them and then control it’s OK to be a control freak. We can’t control the, uh, financial markets or interest rates, but we can control how we plan and how we react. So thank you so much for this opportunity.

I hope you enjoyed this interview before we go. I wanna quickly recap the, the three ways that various financial advisors and investment brokers get paid for their services and advice. Number one is commission based. This is when a commissioned broker recommends a particular investment product. It could be a mutual fund or an exchange traded fund, and it would include either a load, which is a fee that comes out of your account or the product company could pay that broker directly without charging you working with an advisor that gets paid on commission is not necessarily a DISA. However, it may create a conflict of interest. For instance, the advisor may only recommend products that pay them the most, even if they’re not the best for you. Therefore if you use a commission based financial advisor, always make sure that they are a fiduciary Rita. And I talked about that in the I view that means they have a legal obligation to put your interests above their own.

The second type of payment structure is fee only. This is when a financial advisor does not sell any products. They don’t receive any commissions and they typically operate as fiduciaries. They may get paid hourly rate, a fixed monthly or annual retainer, or even a percentage of the investment portfolio that they manage. A typical fee could range from one to 3% of your total asset value for a portfolio arrangement. For example, if your advisor manages a hundred thousand dollars for you, their fee could be a thousand dollars a year. And the third payment arrangement is fee based fee based financial advisors kind of blend the two models that I just talked about. The commission only, and the fee only they may sell investment products for a commission may charge a fee calculated as a percentage of your portfolio or both. So it could create a similar conflict of interest as a commission only fee structure, no one payment model for a financial advisor is inherently right or wrong or good or bad what’s essential is that you understand their or fees.

And you believe that the advisor will help you achieve your financial goals in light of how they get paid. So always discuss fees with a potential advisor and get it in writing so that you have it very clearly stated before you begin working together. Before we wrap up, I wanna invite you to connect with me on Instagram at Laura D. Adams. Another great way to stay in touch is to join my private Facebook group called dominate your dollars. You can search for it on Facebook or text the word dollars, D O L L a R S to the number 3, 3, 4, 4, 4. And I will send you an invitation to the group. And if you have a money question or a comment, please leave a voicemail message by calling 3 0 2 3 6 4 0 3 0 8. You can also visit Laura D adams.com where you’ll find my contact page and a whole lot more about me, my books and online courses. That’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from B Santora. If you’ve been enjoying the podcast, do me a quick favor and rate and review the show that really helps new listeners find us and understand what the show is all about. And don’t forget that the backlist episodes and show notes are always available in the money girl [email protected]

If you like the episode you just heard, you’ll love the modern mentor podcast. Another show on the quick and dirty tips network. Have you ever wanted career advice from a professional? Well, every week on modern mentor host, Rachel Cook, give straightforward answers to complex questions to help you navigate the workplace. Check out episode 6 61 on how to communicate better with colleagues from different generations, whether you’re just starting your career or you’re 40 years in, you’ll learn a lot from this episode, check out modern mentor on Spotify, apple podcasts, or wherever you’re listening now.

Using a financial advisor is one of the best ways to make sure you’re on track for a comfortable retirement. A trusted advisor can also help you answer complex money questions, such as whether you should buy a homeget a business loan, or settle zombie debt.

But how knowing which type of financial advisor you should work with can be confusing. There are many different investment firms and advisors with different designations to choose from.

Even if you don’t think you need a financial advisor right now, it’s wise to understand the types of services they offer, how they get paid, and how to check their background and any complaints filed against them.

To get clarity on what you should know about working with a financial advisor, I interviewed Rita Cheng, CFP. She’s the CEO of Blue Ocean Global Wealth, an investment advisory firm that strives to be a trusted partner and educational resource. Rita is also an Editorial Review Board Member at Finder.com, a comparison site helping consumers make better financial decisions.

I think you’ll enjoy our conversation and come away with a better understanding of what it’s like to work with an advisor and how to get started. We cover:

  • How your goals determine if you need an advisor and which type
  • If you need to be wealthy to work with an advisor
  • Different types of fees that advisors charge
  • Who’s an excellent candidate to work with a financial advisor
  • Differences between robo-advisors and financial advisors
  • Where to find potential advisors and check their backgrounds
  • Questions you should ask a potential financial advisor

Listen to the interview using the embedded audio player or on Apple PodcastsAudibleStitcher, and Spotify.

Understand How Financial Advisors Get Paid

Here are three ways various financial advisors and investment brokers get paid for their services and advice:

1. Commission-Based

When a commissioned broker recommends a particular investment product, such as a mutual fund or exchange-traded fund, it may include a “load” or fee that comes out of your account—or the product company may pay a broker directly.

Working with an advisor that gets paid on commission isn’t necessarily a disadvantage; however, it may create a conflict of interest. For instance, the advisor may only recommend products that pay them the most, even if they’re not best for you.

Therefore, if you use a commission-based financial advisor, make sure they are a fiduciary. That means they have a legal obligation to put your interests above their own.

2. Fee-Only

Fee-only financial advisors don’t sell products or receive commissions and typically operate as fiduciaries. They may get paid an hourly rate, a fixed monthly or annual retainer, or a percentage of the investment portfolio they manage.

A typical fee could range from 1% to 3% of your total asset value for a portfolio arrangement. For example, if your advisor manages $100,000, their fee could be $1,000 a year.

3. Fee-Based

Fee-based financial advisors blend the commission and fee-only payment models. They may sell investment products for a commission, charge a fee calculated as a percentage of your portfolio, or both. So, it could create a similar conflict of interest as a commission-only fee structure.

No one payment model for a financial advisor is inherently right or wrong. What’s essential is that you understand their fees and believe the advisor will help you achieve your financial goals. So, always discuss fees with potential advisors and get it in writing before you begin working together.

Financial Advisor Resources:

This article originally appeared on Quick and Dirty Tips.

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About the Author

Laura Adams, Quick and Dirty Tips

Laura Adams, Quick and Dirty Tips

Laura Adams is an award-winning author of multiple books, including Money Girl’s Smart Moves to Grow Rich. Her newest title, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, is an Amazon No. 1 New Release. Laura’s been the writer and host of the popular Money Girl Podcast, a top weekly audio show in Apple Podcasts, since 2008. She’s a frequent source for the national media and has been featured on most major news outlets including NBC, CBS, ABC FOX, Bloomberg, NPR, The New York Times, The Wall Street Journal, The Washington Post, Money, Time, Kiplinger’s, USA Today, U.S News, Huffington Post, Marketplace, Forbes, Fortune, Consumer Reports, MSN, and many other radio, print, and online publications. Millions of readers and listeners benefit from her practical financial advice. Her mission is to empower consumers to live richer lives through her podcasting, speaking, spokesperson, teaching, and advocacy work. Laura received an MBA from the University of Florida. Visit LauraDAdams.com to learn more and connect with her.

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