I've been getting some questions lately about differences between a financial
advisor, a financial planner and a financial coach.
So in today's video,
I just want to discuss some similarities and differences between those three so
that you can decide which one you should work with.
I am Tiffany Thomas with Wealthy
Tiffany Dotcom, and I achieved financial freedom at age thirty eight.
So if you want to achieve financial freedom at a young age as well,
hit that like button and hit the subscribe button and we're going to dive right in.
Let's just talk about a few reasons why someone may want to work with a financial
advisor or financial planner or a financial coach.
And it could just be as simple as you want
to set up a budget and manage your money better.
Or maybe you want to set up a debt payoff
plan or you want to know where to invest your money or how to invest your money.
There's all different sorts of money related items.
So depending on what you want to do with your money, where you're at with it,
you may want to work with someone in the financial industry.
Let's first talk about a financial advisor.
So a financial advisor is kind of hands off.
They just handle your investments so they will manage your investment portfolio
for you and they will select different funds that you can invest your money
in and then they'll actually invest your money for you.
And since they are doing that work for you, they are going to charge a fee.
Usually it is a percentage, it's usually a one percent fee that they
charge of your investments that you have with them.
And there are a ton of different financial advisors at a lot of different companies.
For example, there's Ernst and Young or Morgan Stanley or even Bank of America.
A financial advisor will usually meet
with you quarterly to go over your investments.
And since they work for a particular
company, they will only have access to certain investments and they could even
have access to a life insurance plan or other investment products.
But essentially, they just have what is at the company that they are working for.
So they don't have access to all of the different funds out there.
And also sometimes they get paid commission to put you in a certain fund.
So if they tell you you should be investing your money in a certain
Morgan Stanley Fund, for example, they may be making a commission off of that.
So it may not be the best fund for you.
So you really want to be careful when you're working with a financial advisor,
you want to ask them exactly how they're getting paid and even specifically ask
them, OK, are you getting paid more if I invest in these particular funds that you
were recommending because it may not be in your best interest to be in those funds.
And there are some advisors that are called fiduciary advisors,
and that means they are legally obliged to act in your best interest.
They usually charge a flat salary or a fee or receive a cut like that one percent fee
that we talked about of the assets under management.
So whatever amount you have invested with them and because of the compensation
structure, advisors are seen as having fewer conflicts of interest than brokers.
So if you do choose to work
with a financial advisor, definitely find one that is a fiduciary
advisor so that they do have your best interest at heart.
And there are some that claim to be
a fiduciary advisor, but they may not be because they are looking to make money.
That's their profession.
And sometimes they may still recommend things that may not be the best for you.
And like I've talked about on my channel before, I really feel like you can do
a little bit of research and invest on your own.
And that way you wouldn't have to be
paying someone a fee to invest your money for you.
And if you don't want to take any time
to learn to invest on your own, then I would look for a manager that is
going to charge a flat fee, a flat rate, rather than a percentage of the money
that you have invested, because that can turn into a huge amount
over time, especially if you think about compound interest, if you are paying them
one percent every year and your portfolio continues to rise over the years,
that compound interest that you're paying them is going to increase over the years.
So you yourself could be earning
that money instead of paying it to your financial advisor.
So just be aware of that. All right.
Let's move to financial planners.
The second one that I want to talk about,
and they are different in the fact that they don't just focus on your
investment portfolio, although that can be part of it.
But they also ask you what your long term goals are.
And they can look at estate planning or how to reduce your taxes,
your cash and debt management, insurance and other investments.
They could also sell you life insurance or
other investment products, but they try to work with you on your money goals.
And look at your full financial picture and then go from there.
But they also charge a fee, which could be a percentage
of the investments that you have with them or it could be a flat rate.
So once again, I would say, look for someone that just charges a flat
fee so that you are not paying a percentage of the amount that you have
invested, which is going to grow over time.
So you'll be paying more and more to them over time.
And they can also get commissions on certain products that they sell.
So be aware of that with financial planners as well as financial advisors.
And let's talk about the last one.
Number three, a financial coach, and they are more about looking
at the habits and behaviors that you have around money.
So they want to take a look at your full financial picture as well,
how your budget is or your long term goals that you want to achieve and where you are
at with retirement or where you are with your debt.
And then they can set up a plan with you
to work on those goals that you want to focus on.
And also, if they are skilled
in the investment area, then they can help recommend investments
for you, but they are not going to manage your money for you.
So usually a financial coach just charges
a one time fee, a flat fee, and it could just be, you know,
if you have one session with them or they might have a fee if you want to do a six
week program with them or something like that.
But since they are not managing your
money, they are not taking a percentage of your investments because you will be
the one that is managing your own investments.
But they can kind of work with you and show you, OK, let's set up this budget.
And once you have this amount saved, then we can start investing in a Roth IRA
or in real estate, whatever it is that you want to be investing in.
And the end goal with a financial coach is
to not have you be dependent on them for the rest of your life like you would
with a financial adviser, because you would be paying them
the entire time that your assets are managed with them.
And a financial coach would just want you
to learn the skills to better manage your money on your own.
And you can work with them for however long that timeframe is that you select.
But eventually they want you to do it on your own.
And I can see some people need more accountability.
So you might work with someone longer or you might come back to them in a while
and do kind of a checkup with them or something.
But it's more about changing your
behaviors in the beginning and your habits in the beginning.
What you're spending your money on, are you spending on your priorities?
Are you saving enough money for retirement?
And they can really help you along those lines.
And I call myself a wealth mentor because
I like to focus more on the wealth building side of things.
So I'm not just about getting out of debt
and setting up a budget, although that can be part of it.
But I really want you to achieve financial freedom.
I want you to have that long term goal and be able to invest your money and make
it work for you instead of you always working for the money.
So depending on what type of financial
coach you find, there are different skill sets that each of them have.
So just find one that you relate to the most that you think you could
benefit the most from and work with that person.
Also, a financial coach doesn't have
access to certain investment products or life insurance or anything like that.
So they are not going to push products
on you that would not be in your best interest.
And honestly, if you feel like you just
need some more information, there are plenty of videos out there.
I've created a ton of content on how to invest or how to manage your money
better, and so have a lot of other YouTube videos.
So there's a lot of information out there that you can find just free and you can
take what you need and start applying it into your own life and go from there.
So you may not need to work
with a financial advisor or a financial planner or a financial coach.
But I wanted to share these similarities
and differences with you so that you can have an idea on who is out there
and who you should be working with if you need to.
And I personally have chosen not to work with anyone.
I did when I had a nine to five job
for a little bit, but I started doing research on my own
and found out that what he was recommending wasn't the best for me.
So I ended up doing my own research and investing on my own.
And things have been really good. And that's the thing.
You can create high returns without using
a financial advisor or a financial planner.
You don't really need them to invest
in these specific expensive funds that they have in order to get great returns.
Because I have seen that in my own life.
I have seen great returns by investing on my own.
And like I mentioned earlier, if you are doing it on your own,
that means you have more money essentially to invest and put toward your
Financial Freedom Fund because you aren't paying that one percent fee over time.
Or whatever it might be, you get to keep that money instead,
tell me in the comments, if you've worked with a financial advisor
or a financial planner or a financial coach before and your experience
with that, and if you found this video helpful, please hit that like button
and share it with someone else who would like to hear this information and hit
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Thanks so much for watching.
I'll see you in the next video.