Should you hire a financial adviser or financial planner? Or maybe you know enough about stocks to pick your own and you are considering just going it alone and buy stocks with a discount broker instead? Let’s take a look at some of the pros and cons of each decision.
What Does a Financial Adviser Do?
A financial adviser is a person that will help you with investment advice, insurance planning and various other financial decisions that you will have to make throughout life. The goal of a financial planner is to balance the use of stocks, bonds, options and other financial instruments to meet the client’s financial needs and manage their level of risk tolerance. Often a financial planner will earn a fee from the products that their client uses when they broker a deal. There are also full service brokers that act as financial planners in the area of investments only. If you need a will, estate planning, or have a retirement goal, a financial planner can handle all of the leg work that it takes to get things set up properly.
What Does a Discount Broker Do?
A discount broker is the middle man between you and the exchange. They provide no investment advice and simply place your stock trading orders and charge a discount commission. In the past, only the wealthy who could afford the fees of a full service broker had access to the markets. Now, with the advent of discount brokers, almost anyone can invest in the markets. A discount broker will offer personal accounts, retirement accounts and provide trade execution for you.
Benefits of Having a Financial Adviser
A financial adviser is good to have if you do not know much about where to get started and you want to have someone invest for you. There are various products that you should be able to get from one financial adviser. Mostly they will be promoting the mutual funds that their company encourages them to push but often you can find an independent fee only financial planner that has no arrangements to sell certain investment or financial products. There are also financial advisers that only accept a percentage of assets under management. A financial adviser could be beneficial to you if you prefer to hire someone to make financial decisions on your behalf.
Benefits of Using a Discount Broker
If you know how to do your own research, using a discount broker could be very beneficial to you. In comparison to a financial adviser, a discount broker only charges a commission when a buy or sell is made. There are usually no fees to open an account or put funds with the broker. Because they do not make decisions for your account they are not responsible for losses. A discount broker could also offer general investing education. A really good discount broker will provide you with everything you need to learn a lot on your own. You should be able to watch webinars, read informative posts all while getting the best trade execution prices.
How About Having Both?
Why not just hire a financial adviser and also continue to place your own trades with a discount broker? I am not sure that would be too efficient but it could save you some money. At the end of the day it really depends on whether you are looking to save money or make money. Depending on your skill set and knowledge, you could save money with a financial adviser or a discount broker.
Do you have a financial adviser? Would you recommend a financial adviser to others?
This post was written by Latisha.