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How to Compare Financial Services Companies
Financial services companies include a range of services spanning from traditional banking to auto loans, retirement services and mortgage lending. In order to choose the best financial services company, you will need to consider many factors including:
- Your financial goals
- Consolidation of services
- Your location
- Recommendations from others you trust
- The associated costs
- The company’s ethics
- Access to information
- Personal services
You will be required to do a bit of research and analysis to find the right financial services. Fortunately, you are not locked into any single banking provider once you make a selection. If your needs change or you find yourself unsatisfied, simply move to new financial services company that better suits your goals.
Your Financial Goals
It stands to reason that the company you select to help you manage your money should be one that offers the service you need. Taking out a mortgage or a home equity loan is a far different service than starting up a new Roth IRA.
Consider your specific needs from a financial provider and then start your search there to find specialists in the areas you consider important to you.
Consolidation of Services
While it is important to work with specialists in your desired financial areas, you can quickly become over extended if you wind up using too many banks – one for each banking need. If you are comfortable and satisfied with one bank, rather than starting up new accounts in a brand new bank for a different purpose, consider using consolidated services for convenience.
One concern about using a single bank for all of your financial needs, however, is the risk of missing out on better offers from other services. It is always wise to do some shopping and comparing, but if your bank and the competition are all offering the same mortgage rates, it might be worth it to go with what you know.
If you live in New York City, you have an endless supply of banks and financial houses ready to do your bidding. If you live in a small town with less than 1,000 residents, your options are a bit more limited. You may decide that some banking, like a standard checking account or mortgage, is worth doing locally where you will have easier access to your funds.
On the other hand, the availability of internet service and online banking have provided that same big city endless supply of investment firms and banks to would-be customers world-wide. Consider your location for money that you want close at hand, but don’t feel limited by your location for larger, long-term investments
If your uncle is always borrowing cash and fending off collections calls, he is not the sort of person to listen to for investment advice. If your uncle has built up a nice nest egg and has made the same sorts of decisions you plan to make with your money, he might be a great source of information about which financial services firms to consider for your own goals.
Recommendations from others who have done research and invested wisely are valuable resources. Consider these recommendations as you do your own research to be sure what is recommended to you checks all of the boxes you need for your own funds.
Fees and Costs
Financial service companies are in the business of business. They need to make money, and they do so in many ways. One of the ways is through the fees and transaction costs they charge to customers like you. There is no standard cost for doing business with a financial services company.
Many banks are upfront about costs and fees in order to build confidence and trust with customers. The more you have to dig to find out the fees and rates for the bank, the more concerned you might become about just how much you’ll wind up paying to work with your own money. Always read and understand the fine print for financial services – otherwise you may wind up paying more in fees than you stand to make in return.
Ethics and Business Practices
Over the last decade, banks have made the news many times for their business practices. Banks have been sued, bailed out, called to task and investigated for all sorts of practices. Ultimately it is a personal decision about the financial services you feel you can trust with your funds. For many, building trust and confidence with a bank includes feeling comfortable with a financial service’s actions in the past.
Access to Information
Not all online banks are created equally. If you prefer to have access to your financial information around the clock with instant updates, you will need to be sure your choice for a financial services provider offers that service.
The same is true for having online capabilities to make transfers, pay bills, change investments and handle your preferred transactions yourself without having to use a bank teller, phone representative or send in forms through the mail.
Finally, should you have a question or a concern about your mortgage, retirement savings, banking or investments, you will want to speak with someone quickly, if not immediately. Different financial services companies provide different levels of personal service for customers.
While almost all companies providing financial services will tout their customer service, not all of them follow through on their claims. Reviews by real customers of the various banks can provide more information about just how accessible the companies are when concerns arise.
The financial services industry can be a challenge to navigate. Fortunately careful research and thoughtful planning on your part will make it easier to find the services you need and be sure they are being provided by the financial services firm most closely matched to your own goals and considerations.
Financial Ad-visor or Financial Planner: Understanding the Difference
There seems to be no limit to the number of acronyms, abbreviations and titles in the world of financial services. Two of the most confusing terms sound as if they are the same, but they are, in fact, very different.
Financial Ad-visor versus Financial Planner
The term “financial ad-visor” is a broadly used term across the industry for anyone who is offering you financial advice. This can range from your friendly neighborhood bank teller to the stockbroker making a huge commission every time you change your mind about your investment.
A “financial planner” on the other hand, is a very specific term for a financial professional who is tested and certified by a governing board. A Certified Financial Planner has passed a challenging standardized test over a range of personal financial concerns and must continue to be trained and use continuing education to stay updated in the field.
Using Financial Ad-visors
There is no governing body for financial advisors. There are no limits on the term at all, meaning truly anyone can claim to be a financial advisor. Many professionals in the financial services sector offer some form of financial advice related to their various products. Therefore they use the term “financial advisor” as it relates to their service.
Often these financial advisors will offer their advice for no charge. This is possible because their advice often heavily relies on selling you a product that will have additional commission for them. That is, they don’t need to change for the advice, since they are advising you to buy their products.
Choosing a Financial Planner
A certified financial planner is bound by the requirements of the certification process. In most cases, especially for fiduciary planners, this means always working in the client’s best interests. A financial planner who charges an hourly or flat fee rather than commission is even more removed from the potential of bias toward certain products.
The job of a financial planner is to help a client clarify their financial goals and offer advice on ways to meet those goals. While the financial planner might offer suggestions on certain products or investments, the most important item to come from the meeting is a comprehensive written financial plan that the client can use to guide future decisions, even if the client chooses not to work with that financial planner in the future.
How to Find a Financial Planner You Can Trust
A financial planner’s job is to help you save and invest your money to meet your own goals. This is not the same job as the insurance agent trying to sell you insurance products, or the stockbroker charging you fees to buy and sell stocks on your behalf. A financial planner works with you on specific goals like buying a home, paying down debt or saving for retirement.
Anyone can call themselves a financial planner, and anyone can offer financial advice. You certainly don’t want to take the advice of just anyone, however. If you choose to work with a financial planner, you absolutely need one who you can trust.
Many financial planners have a long list of acronyms following their names on business cards. These can mean just about anything, but the one to look for is the CFP, or Certified Financial Planner. This credential means the planner has passed and mastered the standards required by the Certified Financial Planner Board of Standards. They are qualified by a governing agent to offer advice on personal finance.
Many financial planners make their money based on commissions. When you, the customer, put your money in a certain investment option, they, the planner, make some money from that transaction. This can create a scenario where planners may become biased toward certain investments for their own income potential rather than offering you a wider range of options. Consider whether a financial planner is using a commission, hourly or flat fee structure as you make your choice on who to work with.
Your money and personal finances are private business. One way to find someone you can trust is to ask friends and colleagues for recommendation of who they trust. Try to find others in similar situations as your own. A friend with a blended family might offer you recommendation for a planner who understands the needs of blended families after a remarriage, for example.
Personal recommendations are valuable, but always be sure to get a range of options from those you trust and follow those recommendations with additional research of your own.
The National Association of Personal Financial Ad-visors
If you are starting from scratch, the National Association of Personal Financial Ad-visors, or NAPFA, is a great place to start. The standards to be part of the NAPFA organization are even more rigorous than the criteria to become a Certified Financial Planner. You can count on fee-based services, rather than commission and professionals who have pledged to act only in the customer’s best interests.
A fiduciary planner has pledged to act in the customer’s best interests at all times. A sustainability standard is less than a fiduciary standard, and a planner at the lower standard has only pledged to sell you something suitable – not necessarily the best thing for you.
A Background Check
You can and should ask your financial planner some tough questions as part of your own background check. The first things to check are if the planner has ever been convicted of a crime or investigated by a regulatory body. You should check references as well for the planner, the same way you would for a nanny, electrician or plumber.
Your background check should extend online to be sure the credentials your would-be planner claims to have are current and legitimate. There are discipline records available for Certified Financial Planners and it is easy to call to administrating boards for other certifications to be sure your planner is up to snuff.
Warren Buffet is famous in the investing world for outperforming market averages. He’s famous because this is so unusual. If a financial planner tells you he will help you beat the market averages, walk away. Likewise, if someone tells you a big money-maker is risk-free, run away. Understanding financial markets is complicated, and you are looking for good advice across a range of instruments – not a promise of shady deals and unrealistic expectations.
As you search for a financial planner, be savvy in your choices and take your time deciding to be sure you’re making the right choices for you and your loved ones. The right financial planner will help you understand your own goals and options and offer you advice on a range of pathways to take you there.