Ashwin Ramdas
Updated Dec 19, 2022
Mate Checked
If you’re in the market for a financial advisor, there are plenty to choose from that cater to any financial situation. Here are some common questions to ask when looking for the right financial advisor for you.
Financial advisors can help you plan for retirement, minimise risk and help you achieve your financial wealth over the long term. They can also help with things like setting up an SMSF, help with investment management, help you with your budgeting, assist with having the right insurance and provide guidance on estate planning. Exactly which financial advisor you choose will depend mainly on your age, goals and financial position.
Working with a financial advisor who is a good fit for your financial situation is very important. Making the right choice from the beginning will ensure you get the services you need and not pay for the things that you don’t. We at SMSF Mate think that the following steps can help you in your quest to find the right financial advisor for your needs.
There are many different iterations of financial advisors to consider. Just like a business can have a brick and mortar shop front or be entirely online, financial advisors are very similar. Services can range from online advisors to local independent firms, to national financial planning organisations.
A Robo financial advisor offers a straightforward and cost-effective way to manage your investments. Generally, you will start by providing your details and completing a comprehensive survey about your personal circumstances and financial position, goals and risk tolerance which the advisor will use to build a profile and investment portfolio for you.
The term ‘robo advisor’ means that there is minimal human intervention in the financial advice process, and the digital financial advice given is usually systemised with a quantitative or mathematical process.
Robo financial advisors are a decent option for investors who are new to financial markets, as they have low fees compared to full-service advisors and no minimum portfolio size so any investor can use them.
An online financial advisor offers a virtual way to connect to a financial advisor and provides an additional level of consultation to what the Robo financial advisor services offer. In terms of investment management, it may be very similar to the Robo financial advisor services, but with the added ability to discuss the process with a real person if you have any questions or concerns which a lot of people value.
A full-service online financial advisor will generally offer everything that a more traditional financial advisor would but without the ability to visit them face to face. You will typically have a dedicated person to work with you to achieve your financial goals.
Traditional financial advisors are the most common and well known in the financial advice space. They provide the highest levels of service and offer a tailored approach to managing your financial needs and investments. Generally, all this additional service comes at a higher price and sometimes there are minimum balance amounts as well, which might be $200,000 or more in assets. If you’re looking for a highly qualified and specialised service, then a traditional advisor is likely the best bet.
A traditional financial advisor can offer some level of comfort when the markets aren’t going in your favour, which is another reason why you might want to consider this option when there is real money on the line. Investors tend not to worry about their investments when they appreciate in value, but when the direction changes, you might want to have a chat with someone in person.
If all you are looking for is assistance with managing your investments and you have a portfolio or balance than $100,000 or less, then a Robo or Online financial advisor is an excellent way to go. Both these financial advisor types are a great entry point as they usually have no account minimums to get started.
If your financial position is a little more advanced and you need full-service financial advice on several topics like investment management, estate planning, tax strategies and insurance then a traditional financial advisor is a likely choice for you. As you would expect, the higher the level of service, the more expensive the solution becomes, but the cost is always relative to performance.
In most cases, there a few different cost structures you’re likely to encounter when deciding on your financial advisor with Robo financial advisors coming in at the cheapest by charging a management fee as a percentage of your account balance. These can be as low as 0.2% of your account balance and up to around 0.5%.
Online financial advisors are in a similar boat to their Robo counterparts, charging a management fee on your account balance, but they may also charge a flat fee or a fee for service on top of that. They typically cost 1% of your account balance per year. There can be an annual fee, and this can vary depending on how complicated your financial situation is and how much work you need doing.
Traditional financial advisors charge a fee of around 1.5% of your account balance for an average size account of $200,000, but they will vary depending on the overall account balance and the work involved. Financial advisors will often sharpen their pencil with regards to the management fee for larger accounts. Still, they may also charge an annual fee, hourly fee or a retainer in conjunction with the management fee.
