The average middle-income person typically doesn’t think too much about financial planning. Many randomly choose investments for their 401(k) and don’t think about it again until later in life, while others read a few articles or watch some videos and feel equipped to make their investment decisions on their own. A survey performed by a top financial company found that one in three people choose their investments without any outside advice.
Misconceptions about when and why to use a financial advisor could be one of the main reasons people refuse to reach out for much needed guidance. The following are three common misunderstandings people tend to have about financial planners:
Financial planners are expensive – Many people believe that financial planners charge exorbitant fees. A survey found that 44 percent of those polled believe that they could not afford a financial planner but that is far from the truth. “There are professionals who work with younger individuals and middle-class families on an hourly or fixed-fee basis,” says Eleanor Blayney, a consumer advocate with the CFP Board.
My finances are not that complicated – While having a 401(k) or IRA and basic insurance may seem like enough, many people overlook other important aspects that can affect their financial situation.
Parents of small children may not understand the importance of disability insurance which can assist with lost income due to injury or illness. Financial planners can suggest these type of insurance options, which you might not find on your own.
Financial planners don’t always have investors’ interest at heart – Memories of Bernie Madoff play a central part in the conception that financial planners are greedy and take advantage of their clients.
If you’re concerned your clients might believe this, it is wise to earn an investment advisor license and act as a fiduciary, as this denotes the legal responsibility to put the client first. “This includes, among other things, full disclosure of any conflicts of interest, as well as all sources of compensation,” says William Davis, Executive Vice President of Apex Financial Advisors.