- 1 Pros and Cons of financial advising
- 2 Independent advising
- 3 1. Telling clients they can beat the market
- 4 2. Failure to figure out what the client really wants
- 5 3. Overlooking the client’s risk tolerance level
- 6 4. Selling investment unwisely
- 7 5. Making decisions with communicating with clients
- 8 6. Operating without the required industry certifications
- 9 The don’ts to consider when hiring a financial advisor
A career in financial advising is typified by a huge income and growth potential as well as bouts of instability. The earning potential is heightened by the demand for solid financial advice. According to Investopedia, the financial advising field is slated to grow at the rate of 15% in the ongoing decade leading to 2024. Aside from unlimited income potential, the other benefits of choosing the career include the opportunity to offer meaningful advice and a flexible work schedule.
Pros and Cons of financial advising
Clients often turn to professional financial advisors to obtain meaningful advice on pertinent issues like investment decisions and debt management. Due to their educational background and experience, financial advisors can easily handle matters to do with investment options, retirement, and business risk. When it comes to earning potential, the availability of numerous financial instruments and rapid industry growth has made it possible for experienced advisors to earn more money.
Clients can pay for services through commission and fee-based payment plan. Financial advisors also enjoy flexible work schedules. The setup creates a perfect opportunity to work without sacrificing the joys of life. Financial advisors also face several challenges in the line of work, i.e. stressful engagement and stiff compliance regulations. Due to changing market dynamics, advisors should push for continuous prospecting as part of the learning curve.
Independent financial advisors form a growing segment of the financial services experts. The market segment is worth trillions of dollars, and the prospects for future growth remain very bright. Independent advisory firm, Coral Funding offers personalized guidance to individual and corporate clients with basic and complex financial needs such as debt and cash-flow problems.
Customers who choose Coral Funding over competitors also enjoy transparent fee structure and customized guidance. The success of the firm stems from cultivating a deep, longstanding relationship with clients.
Mistakes by financial advisors can prove very costly to clients and the firm issuing the advice. This can easily happen if insufficient thought and safeguards are not put in place. According to the USA Today owned Spectrum Magazine, the most common mistakes financial advisors make include:
1. Telling clients they can beat the market
Operating in a free market can be risky because of the fluid market situation. The market broadly encompasses stock, bonds, commodities trading, and other financial and investment indexes. Due to the volatile depiction of the free market, financial advisors need to be careful about promising clients a guaranteed return when conducting a sales pitch.
2. Failure to figure out what the client really wants
Many financial advisors make the mistake of focusing too much on their own returns. The focus is usually trained on striking it big to save for retirement and live a happy lifestyle. In their push, the advisors may be tempted to place a client’s whole life savings in a volatile account thereby jeopardizing the investment and trust. It is important for financial advisors to acknowledge that clients hire them precisely because they need sound financial advice and nothing less.
3. Overlooking the client’s risk tolerance level
Young financial advisors are better adept at handling personal financial challenges and market volatility. Due to factors like age variability, work experience, and industry exposure, clients may have a different risk comfort or tolerance level compared to financial advisors. When advising older or retired wealthy clients, financial advisors can create a good rapport by making investment-defining decisions that are guided by the client’s risk comfort level.
4. Selling investment unwisely
Financial advisors need to follow due diligence when selling investment options. This is important because clients may not be fully aware of everything in their investment portfolio or events shaping the market. The trust bestowed on financial advisors by clients is sufficient reason to practice fiduciary and other desirable money management accountabilities.
5. Making decisions with communicating with clients
Communication is crucial before executing any business deal. Failure to get in touch with clients can pose serious problems to advisors looking to make far-reaching financial decisions. As a best practice, advisors should consider issuing a detailed questionnaire to capture any late changes to the prospects or client’s investment plan and relationship.
6. Operating without the required industry certifications
Advisors who are already making tidy sums may have second thoughts about acquiring crucial industry certifications such as the CFR certification. To serve clients better, financial advisors need to constantly upgrade their education and competence. Professionals with additional training often enjoy better pay and are better placed to expand their advising role.
The don’ts to consider when hiring a financial advisor
Clients, on their part, should be careful about hiring financial advisors that are not up to the task. According to small business intelligence site All Business, clients can avoid the pitfalls by doing the following:
• Checking the financial advisor’s professional background and references
• Asking the right probing questions
• Not overly relying on company blueprints that don’t give you a clue on what to expect.
The analysis of the professional background and reference will reveal the advisor’s professional credentials and level of competence. All these elements are also important because they add up to fomenting trust and build long-term relationship between the client and advisor.
There are many self-believers who have no problem executing mundane projects like home improvement, swimming pool installation, and car repair. However, the ability to overcome these challenges single-handedly has made most do-it-yourselfers reluctant when it comes to hiring experts like financial advisors.
The same cannot be said when circumventing complex issues like wealth management, corporate taxation and legal proceedings. You can always trust a financial advisor to offer sanctioned advice on complex financial issues bereft of emotions and biased inclinations.