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What Does a Financial Advisor Do?

Latest update: February 1, 2024

An effective financial advisor is like an architect for retirement, creating the blueprints for your retirement based on your fiscal situation and executing decisions to build and grow your investments. A financial advisor can help guide your decisions to invest wisely, budget appropriately, or plan for the future.

What Does A Financial Advisor Do?

What Is a Financial Advisor?

A financial advisor is a finance professional who helps you manage your money to reach your short- and long-term goals in exchange for a fee. If you prefer, these professionals can also manage your money for you, overseeing your assets, debts, and expenses.

You can find an advisor locally or work with one online. Their advice will cost you, but a meaningful partnership with a financial expert can prevent you from missing out on surefire investments and other costly financial mistakes.

Financial Advisors by Another Name

Financial advisors can also be wealth managers, robo-advisors, and certified financial planners. The only difference is the title given by the employer or licensing organization. Look for someone with a Certified Financial Planner (CFP), chartered financial consultant (CFC), or chartered financial analyst (CFA) designation.

Financial advisors who are fiduciaries are legally bound always to put the clients’ best interests first. Insurance agents, stockbrokers and others who sell or handle direct investments can call themselves financial advisors, but they might not be fiduciaries. These professionals often earn commissions based on the products they sell you.

In 2020, the SEC introduced greater rules and regulations that require broker-dealers and investment advisors to disclose their relationship with the recommended products they sell. If you’re unsure of a professional’s qualifications, you can ask a financial advisor these questions to filter out the best candidates.

Meeting with a financial advisor

Basic Services From a Financial Advisor

Many financial advisors specialize in retirement planning, debt reduction, and other money management services. You might work with one advisor who handles your portfolio throughout your working relationship or a team of specialized advisors within a firm who help you manage your money. Here’s a list of the common services financial advisors provide:

Advanced Financial Advisory Services

Some financial advisors work with clients who have high-level earnings, investments and savings. These individuals receive what are typically called wealth management services.

Choosing the Right Financial Advisor

With so many titles and designations to sift through, finding a financial advisor who understands your specific situation can be tough. The easiest place to start vetting a pro is FINRA’s BrokerCheck tool. This tool pulls information from the SEC and can tell you whether someone is registered to sell securities and offer investment advice. It will show you current registrations, employment history, and any disciplinary action taken against the person.

Above all, choose a qualified, active financial advisor experienced in your needs. For example, you might not need an advisor who works with high-net-worth individuals if you’re just starting out. On the other hand, you may search for a Certified Wealth Strategist (CWS) or Retirement Income Certified Professional (RICP) if planning for retirement is an immediate need.

How Often To Meet With a Financial Advisor

At the start of your relationship, you’ll meet with your financial advisor a few times to develop a strategy and consider opportunities for managing your money. Once a plan is set, you’ll cut back your contact to check in and adjust your plan as life dictates. Most advisors will offer to meet virtually or in person. For many, annual meetings are enough to maintain your portfolio, ask questions, and account for changes, such as buying a house, earning more money, or sending a kid to college.

What About Robo-Advisors?

Robo-advisors are digital financial advisors that provide direction and recommendations to clients after they complete an online questionnaire.

These advisors can offer more affordable management fees because they don’t offer the robust, personal advice a traditional advisor would, such as budgeting or estate planning. These pros use the same algorithms as financial advisors, but their advice is less tailored. Here, the algorithm will recommend an investment portfolio based on the needs mentioned in the questionnaire. You might choose a robo-advisor if you need basic advice to build or grow your investment accounts, like ETFs and index funds.

Concluding Thoughts On Financial Advisors

A good financial advisor helps you identify your priorities and use your income to support those targets. Depending on your situation, you might require fundamental financial advice or hands-on financial management. The right financial advisor can help you make the most of your income and squash your fears of making costly mistakes. A financial advisor’s value is priceless when navigating the world of money management.

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