Finding the right financial advisor is an important step in securing your financial future, no matter if you’re just starting out or looking to optimize your existing investments. It’s also a proactive step for your family as you mark major milestones or plan for your future.
AAFMAA helps you understand the various types of financial advisors you should be looking for and how to choose one that aligns with your unique needs as a servicemember or military family through every stage of life.
What Does a Financial Advisor Do?
Financial advisors provide guidance to help you make informed decisions about your investments, savings, long-term goals, and other considerations. They assess your financial situation, discuss your objectives, and create a personalized plan to help you achieve those goals.
Financial advisors can also help you with retirement planning, tax strategies, estate planning, and more.
Contrary to popular belief, it’s not only wealthy people who need financial advisors. These professionals can offer valuable advice to anyone looking to improve their financial health, even those of more modest means.
The Fiduciary Standard
The fiduciary standard requires financial advisors to act in the best interests of their clients, prioritizing their clients' needs above their own. This means advisors must provide unbiased advice and avoid conflicts of interest. All recommendations must be made with the client's best financial outcomes in mind.
Not all advisors adhere to this standard, so make sure you note that in your search for a financial advisor.
The Importance of Financial Advisors for Servicemembers
Military servicemembers and their families face special financial challenges due to frequent relocations, deployments, specific military benefits, and other complexities of military life. A financial advisor with experience serving military families can help you navigate these circumstances by providing advice tailored to your military lifestyle and the unique challenges of a military career.
Additionally, advisors can provide expert insight for your military retirement. Transitioning from military to civilian life can bring financial uncertainties that a skilled advisor can help address. For example, they can provide insight on how your VA benefits secure final retirement.
How to Find a Good Financial Advisor
Not all financial advisors are the same. The one you choose will depend on several factors, including where you are in your life or career, your financial situation, and your needs and goals.
Step 1. Assess Your Financial Needs
No matter your financial standing, you can benefit from professional advice, even if your situation seems simple or straightforward. A financial advisor can help with:
Step 2. Choose a Type of Financial Advisor
Once you determine what kind of assistance you need, you’ll establish what type of financial advisor to look for. There are a variety of financial advisors available, with their own benefits and potential drawbacks, including:
Fee-Only
Fee-only financial advisors (not to be confused with fee-based, which we’ll discuss below) charge a flat fee or an hourly rate for their services rather than earning commissions from selling financial products.
This structure minimizes potential conflicts of interest, as the advisor's compensation isn't tied to specific products or investments. Clients can expect unbiased advice tailored to their needs.
However, fee-only advisors might be more expensive upfront compared to other types, which is a major consideration for many individuals.
Commission-Based
Commission-based financial advisors earn their income through commissions on the financial products they sell.
This model can lead to potential conflicts of interest, as advisors who don’t adhere to the fiduciary standard might be incentivized to recommend products that offer higher commissions rather than those that are best for the client.
On the positive side, clients might pay less out-of-pocket for advice since the advisor's compensation comes from product sales.
Fee-Based
Fee-based advisors (not to be confused with fee-only advisors, above) charge a combination of fees and commissions. They may receive a flat fee for their advisory services and earn additional commissions from selling financial products.
This hybrid model aims to balance the benefits of fee-only and commission-based structures by providing comprehensive financial advice while still compensating the advisor through product sales.
While fee-based advisors may offer a broader range of services, clients should remain aware of potential conflicts of interest.
Investment Advisor
Investment advisors specialize in managing and optimizing investment portfolios. They can provide personalized advice on asset allocation, risk management, and investment strategies to help clients achieve their financial goals.
Investment advisors are often fiduciaries, meaning they are legally required to act in the client's best interest. This focus on investment management may benefit individuals with substantial investment portfolios, though their services may come at a higher cost compared to other advisor types.
Robo Advisor
Robo advisors are digital platforms that provide automated, algorithm-driven financial planning services with minimal human intervention. They typically offer low-cost investment management solutions, making them accessible to a broader audience.
The algorithms used by robo advisors are programmed to create and manage a diversified portfolio based on the client's risk tolerance and financial goals.
While they offer affordability and convenience, robo advisors lack the personalized touch and comprehensive financial planning that human advisors provide, making them less suitable for complex financial situations.
Step 3. Figure Out How Much You Can Pay
Along with figuring out what type of financial advisor you need, you also need to figure out how much you can afford to pay for their services. This amount should depend on:
- Your needs: straightforward vs. complex
- Their experience working with military and Veteran clients
- Ongoing vs. one-time advice
Step 4. Do Your Research
It’s often a good idea to speak with others in the military community who have used financial advisors and ask them for referrals or recommendations.
AAFMAA also offers our own fiduciary financial solutions for military families with account minimums of $100K, including financial planning, investment management, and trust services.
Step 5: Hire Your Financial Planner
For many, the next step is scheduling a free or low-cost consultation. This will allow you to get to know the planner and decide whether they are a good fit.
Make a list of questions to ask and points to consider, and remember that you’re trusting them with your money and financial future. For instance, ask them:
Let AAFMAA Help You Make Wise Financial Decisions
For more than 145 years, AAFMAA has served those who served our country. We offer outstanding Member Benefits, including life insurance, mortgage help, and financial planning with AAFMAA Wealth Management & Trust LLC (AWM&T).
Visit us today to learn more about how we help active-duty servicemembers, Veterans, and their families.
This article was originally published October 17, 2019.