There has been much debate in the last decade as to what a financial advisor, or a money manager, actually does for you. Are they an asset, or an extra cost taken out of your potential stock earnings? In the past, financial advisors were the norm. With the advent of the internet, many people are doing it alone and investing online without the advice or the cost of a financial advisor. Financial advisors are general securities representatives (stock brokers) whom are licensed to advise their clients as to what stocks and funds to buy into. They are paid on a commission or fee basis or sometimes a combination of the two.
Costs
Financial advisors are by no means helping you buy the right stock out of the goodness of their hearts. They are looking to make money, plain and simple. Financial advisors can work independently under the guidance of a brokerage firm or for large broker agencies such as Merrill Lynch. In order to keep their jobs and make their money they need customers, and investors to give them their money.
Financial advisers, especially good ones, make their money and get their clients based on their reputation. A good advisor, who gives excellent advice to their clients, will have many other people looking to contract them. In this way, advisors typically are out to make sure you invest solidly.
Video: Find a Financial Advisor
Is a Financial Advisor Necessary?
No, a financial advisor certainly is not a requirement for investing in the stock market. They can however, have their benefits over attempting to do it alone. Obviously they are going to know more about the market than the average investor. It’s their job to know it inside and out. Not to mention, they can typically see the big picture of market movement, and are not so prone to panic during fluctuations.
A financial advisor will most likely make better decisions than you on your own, because they simply know what they are looking for when looking at a particular company or fund. Much like a doctor, someone who works in the field everyday is going to have more experience. Another benefit for the investor is time saved. Instead of researching stocks and watching the market, you could simply let an advisor do it for you. If your time is valuable to you, a broker might be a better and safer option to you.
Obviously there is no guarantee that a financial advisor will make you money, it’s still investing in the stock market. The other major drawback is that you will also be paying either a flat fee or a commission on the money you have invested.
Video: How to Choose a Financial Advisor
Do it Yourself Investing?
Of course you can always invest without an adviser, and save yourself the fees. Keep in mind no transaction in buying or selling stocks is free however, and the online do-it-yourself brokers charge too. Be prepared to do a lot of research if you plan to do it alone, finding out where your money is going to go.
