What is a Financial Advisor?

Financial and Insurance Services

financial advisor

I’m sure a financial advisor has been recommended to you in plenty of occasions concerning money. You’re probably wondering what a financial advisor does with your money and how this professional decides on the best investments and course of action for you. Financial advisors help people decide how to manage their money and reach their financial goals.

The Importance of a Financial Advisor

A financial advisor is three things in your life: planner, educator and partner. A financial advisor is your planning partner because they help you accomplish your goals, such as sending your kids off to a private university in 10 years or buying a vacation home. Both, you and your advisor will touch upon many topics including how much money you need to save, what types of accounts you need, the kind of insurance you should have (long-term care, term, disability and more), estate and tax planning topics. A financial advisor also serves as an educator because their task is to help you understand what is involved in meeting your future goals. In order to plan for the future you must know where you stand today.

How to Know if You Need a Financial Advisor

Getting engaged, married or having a baby are all times when you might want to start seeing a financial advisor. If these are your future plans with your significant other then it’s time to start having conversations about money. If you’re having a baby a financial advisor can help you get the correct estate planning documents in place, as well as work through things like who will work when, what kind of child care you can afford and when it’s time to start planning for college. Let’s say you finally got that promotion, or brand new job and it came with a significant pay increase. Or maybe you inherited a significant amount of money. To avoid misspending that extra money, try using every dollar towards a bill, debt, savings or investing. There’s a common misconception that financial advisor are for the wealthy, but many advisor will work with individuals who do not have significant sums to invest. You may also need an advisor to give you objective advice and reminders, mainly to give you that source of calm, in case of any financial crisis in the future.

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Financial Advisor Job Responsibilities

Most financial advisors meet with you to discuss your financial goals. The scope of this conversation could cover investing only or expand to tax and insurance needs. Your financial advisor will help you understand investment options, returns and risks. They will also help you plan specific life events such as having a child, saving for retirement, college and more. Some examples of financial advisor duties are:



  • Financial planning


  • Insurance planning


  • Risk management


  • Employee benefits planning


  • Investment selection and management


  • Real estate planning


  • Debt management


  • Emergency funds management


  • Legacy planning


  • Small business planning

Financial Plan & Life

Your financial advisor will set up an asset allocation that fits both your risk tolerance and risk capacity. The asset allocation is simply a rubric to determine what percentage of your total financial portfolio will be distributed across various asset classes. your risk tolerance and risk capacity. The asset allocation is simply a rubric to determine what percentage of your total financial portfolio will be distributed across various asset classes. You’ll receive regular statements updating you on your investment portfolio. The advisor will set up regular meetings to review your goals and progress.

Understanding Financial Advisor Fee Structures

There are five main ways that registered investment advisors charge for their investment advisory services: 1) Percentage of assets under management is a percent of the total assets in your account; this percent may vary based on the amount of assets under management; 2) Hourly charges is a rate charged per hour, typically for a special project or consulting; 3) fixed fees is a set amount paid for a service, such as the creation of a financial plan; and 4) Commissions is an additional compensation earned when a purchase or a trade is made 5) Performance- based fees is an additional fee charged if a defined benchmark is out performed. Advisors may charge one of these fees or a combination of these fees. Fee-only advisors only earn money from fees paid by their clients. Financial advisors fixed fees typically range from $1,000 to $3,000. Average hourly fees can be anywhere from $100 to $400 an hour, depending on the advisor and the complexity of the project.

Where and How Does a Financial Advisor Work?

Your advisor might work in a solo office as part of a larger network or he might be employed by a large brokerage house or bank. Typically, your money is held in custody by an independent agent. Your financial advisor might have specialized computer software that creates your investment portfolios.

Tips for Finding a Financial Advisor

If you want to find an advisor easily who suits your need, try using a matching tool. Most matching tools will make you answer a series of questions about your financial situation and goals. The program which you choose will then often pair you up with advisors near you. You can then read their profiles and interview them to determine if any of your matches are a fit. Consider a few advisors before settling on one. It’s important to make sure you find someone you trust to manage your money. If your concerns are the financial advisor’s costs, consider using robo-advisor. Robo-advisor typically require lower minimum investments and charge lower fees.

Questions to Ask a Financial Advisor

A financial advisor can help you with everything from creating a financial plan to managing and building your wealth. You’ll want to do your homework to ensure you end up working with someone who is trustworthy and suits your need. As you’re weighing your options, these are the questions to ask a financial advisor to decide if this is the person you want to manage your money.



  • What certifications do you have?


  • Are you a fiduciary?


  • Do you have any disclosures?


  • What services do you offer?


  • What types of clients do you specialize in serving?


  • Do you have a set account minimum?


  • How do you earn money?


  • What extra feed should I be ware of?


  • What is your investment philosophy?


  • How often do you communicate with your clients?
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