Key decisions you need to make and the problems you will face in the FinancialVerse can be complex, confusing and rapidly changing. In my view, to make the best decisions, you should get competent advice along the way. The good news is, despite public reports to the contrary, there are high-quality, cost-effective, federally and state-licensed financial professionals available to help you. The bad news is due to our financial regulatory system, your ability to get all the advice and services you need for your household from one source or person is almost impossible.
The reason for this is that the individuals or firms may not have all the regulatory permits and licenses to provide the services and products you need. You will usually need to go to at least four sources: a financial planning professional, a life insurance agent (for life, health, and disability insurance coverage), a general insurance professional (for home, property, and liability coverage), and an investment professional (for securities investments).
We are also seeing the rise of internet-based financial advice services for individuals who want to make self-directed decisions using the technology support these services provide. My advice is to seek out trusted people you can talk to, to start your journey. After you have the basic guidance you need, you can make the decision to begin to make direct decisions on your planning, protection and investment needs.
The Key Question - What Kind of Advice Do You Need?
Below is a list of financial services you may seek in the FinancialVerse and the types of advisors best suited to help. The information provided below changes, so please go to the websites of the noted organizations for the most up-to-date information.
General Financial Planning: Certified financial planners (CFPs) can give guidance on investing, saving for retirement, drawing down savings during the Fulfilling Stage, buying long-term-care insurance, financing college, estate planning, getting the right type of mortgage and other personal-finance issues. CFPs must have a bachelor’s degree — or higher — from an accredited college or university and three years of full-time personal financial planning experience or the equivalent in part-time experience (two thousand hours is considered one full-time year). They must take a certifying exam. They must take thirty hours of continuing education every two years. They must adhere to a code of ethics and standards of conduct.
Complex Life Insurance and Estate Planning: Chartered financial consultants (Ch.F.C.) work similarly to CFPs, but holders typically have more training in insurance and estate planning. Candidates need to have three years of full-time business experience within the five years before they receive the designation. They need to pass a number of courses taught by the governing body, The American College of Financial Services. They take a certifying exam. They must take thirty hours of continuing education every two years.
Income Tax Expertise: These are certified public accountants who also have taken coursework and passed a separate examination on financial planning to carry the title CPA/PFS, for personal finance specialist. They can offer income tax and personal financial-planning services as well.
Before sitting for an exam for personal financial planning, CPA/PFS candidates must take seventy-five hours of related courses within the five-year period. They must have the equivalent of three thousand hours of full-time business or teaching experience in personal financial planning. As CPAs, they're required to pass the state examination and to take continuing education courses, specified by the state in which they're certified.
Budgeting and Daily Finance: An accredited financial counselor (AFC) can address a variety of financial challenges, including debt reduction and family finances. These counselors do not sell investment products but rather help their clients learn the process of saving and investing and help them develop strategies for reaching their long-term financial goals.
Candidates must have one thousand hours of financial counseling experience, submit three letters of reference attesting to their professional competence and experience, and take self-study courses and an accrediting exam (undergraduate course work or professional experience may also be acceptable in lieu of the self-study courses). They must take thirty hours of continuing education every two years.
Life, Health, Disability, and Long-Term-Care Insurance: You should consult life insurance agents. Life insurance agents are individuals who are licensed by a state or states to sell life, disability, health, long-term care and certain other types of coverage. Many other types of advisors (e.g., stockbrokers or certified financial planners) may also be licensed to sell or provide advice on these insurance products. There are different types of insurance agents with some only able to offer the products of their company (exclusive agents), while independent insurance agents sell products of two or more insurance companies.
Life insurance agents have to pass state licensing examinations specific to the products they offer, continue to take continuing education courses, pass product training requirements from the insurance carriers they represent, and, in most cases, have errors and omissions insurance coverage in place. Agents offering Medicare-related coverages are subject to additional sales, product and market conduct requirements.
Homeowners, Renters, Vehicle and Personal Umbrella Insurance: You should consult a general insurance agency or property and casualty insurance company. General insurance agents are individuals who are licensed by a state or states to sell all property and casualty insurance coverages. Many other types of advisors (e.g., life insurance agents, stockbrokers, or certified financial planners) may be licensed to sell or provide advice on general insurance products. There are different types of insurance agents, with some only able to offer the products of their company (exclusive agents), while independent insurance agents sell products of two or more general insurance companies.
General insurance agents have to pass state licensing examinations specific to the products they offer, continue to take continuing education courses, pass product training from the insurance carriers they represent, and, in most cases, have errors and omissions insurance coverage in place.
Purchase of Stocks, Bonds, Mutual Funds, and ETFs: Dealing with individuals who hold the chartered financial analyst (CFA) designation in addition to their mandated state and federal securities licenses is a good idea. To take the CFA certification exam, candidates must enroll in a CFA education program, hold a bachelor's (or equivalent) degree or be in the final year of a bachelor's degree program, or have four years of professional work experience, among other requirements. The CFA Institute's code of ethics and standards of professional conduct says, “Members and candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.”
Other individuals or entities you will see in the investment field include:
Robo-Advisors – Robo-advisors are a new class of financial advisor that can provide financial planning, investment advice, or investment management online using technological resources to support the service or advice provided. These services provide digital financial advice based on mathematical rules or algorithms. These algorithms are executed by software, and, thus, financial advice does not require a human advisor. The software utilizes its algorithms to automatically allocate, manage and optimize clients' assets.
There are a growing number of robo-advisory services that are targeted to people who want to make their own investment decisions. Investment management robo-advice is considered a breakthrough in formerly exclusive wealth management services, bringing services to a broader audience with lower costs compared to traditional human advice. Robo-advisors typically allocate a client's assets on the basis of risk preferences and desired target return. While robo-advisors have the capability of allocating client assets in many investment products such as stocks, bonds, futures, commodities and real estate, the funds are often directed toward ETF portfolios. Clients can choose between offerings with passive asset allocation techniques or active asset management styles.
Registered Investment Advisors – Registered investment advisers (RIAs) are fiduciaries which specialize in investments; they typically deal with clients with $500,000 or more in investable assets.
RIAs are individuals or firms that provide advice for a fee on various types of investments as their full-time job. These individuals are registered and licensed by the US Securities and Exchange Commission (SEC) or appropriate state securities or financial regulatory agencies. An investment advisor must have the proper license to sell or give advice on securities products.
Stockbrokers – Stockbrokers, frequently called registered representatives, are licensed by the federal government and the state(s) in which they practice to purchase and sell securities products such as stocks, bonds, ETFs, and mutual funds. They typically receive commissions for the sales of these products. They are subject to oversight and compliance requirements that are dictated by federal, state, and industry self-regulatory entities.
Investment Management Companies – There are a number of investment management companies such as Fidelity, Charles Schwab, and Vanguard, which create, manage or sell investment products such as mutual funds, ETFs, stocks, bonds, and insurance products on a direct basis to the consumer. These companies offer a significant number of resources using their web-based technology. These resources include transaction execution, financial calculators, investment-related information, demographic data and research materials.
Summary
It is important to get the financial advice you need when making major decisions in the FinancialVerse. Take the necessary time to determine the type of advice you need and research available providers. The time investment will likely pay significant benefits.
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