What do financial advisors do?

When it comes to financial advisers, a common misconception is that they only help manage your investments. So while there are financial advisers who specialize in managing investments, you can turn to others to help you with budgeting, taxes, and even buying a home.

Because there are so many types of financial advisors, the space has several different professional designations, such as Certified Financial Planner (CFP) and Chartered Financial Consultant (ChFC). Some financial advisers have a fiduciary duty that requires them to act in your best interest, while others do not undertake to do so.

As you can see, there are many different types of financial advisors covering a variety of roles. This article will take a look at what financial advisors typically do, how they’re paid, and how to know if they’re acting in your best interests.

Key objectives of the financial advisor

Depending on the type of financial advisor, their goals may include:

  • Help you create a financial plan.
  • Help you save and create a budget.
  • Help you manage your investments and plan for your retirement.
  • Help with preparing tax returns, buying a home or buying insurance.

What do financial advisors do?

Financial advisers play many roles, including helping you pay off debt, create a budget, or open a savings account. Later, their work may evolve into helping with taxes, estate planning or investing. Financial advisors also work to help you understand basic and complex personal finance topics as you progress through your financial journey.

The term “financial advisor” does not require any specific degree, but common titles include CFP, ChFC, and Chartered Financial Analyst (CFA). Some degrees are more targeted, such as Certified Investment Management Analyst (CIMA).

Different types of financial advisers

You might think that financial advisor refers to a specific profession or set of responsibilities, but it’s actually an umbrella term that encompasses many types of jobs. Partly for this reason, financial advisers can have many different references.

Financial Advisor

A financial consultant is a financial advisor who holds the title of Chartered Financial Consultant (ChFC). They often do the same job as the CFP.

Ideal for: Anyone who needs general help with their finances, including budgeting, saving, and investing.

Investment advisers

An investment advisor is a person or business who helps people manage their investments. They can be a CIMA and must be registered with the Financial Industry Regulatory Authority (FINRA). This designation can be verified using FINRA BrokerCheck to place.

Ideal for: People who want human assistance in managing their investments.

Certified Financial Planner (CFP)

A CFP is a financial advisor who has met the education and experience requirements set out by the CFP’s board of directors. CFPs must also pass the CFP exam. They are trustees, which means they must act in the best interests of their clients.

Ideal for: People who want help creating a long-term financial plan to help them reach their goals.

Money Coach

A financial coach or financial coach is a professional who helps people with the absolute basics of personal finance. For example, if you need an extra boost in budgeting or starting to save, a financial coach can help.

Ideal for: Those who are just starting their financial journey and need the motivation to get started.

Heritage advisors

Wealth advisers are financial advisers who work primarily with high net worth individuals. They can offer both general financial planning and investment management.

Ideal for: Those with high net worth (some wealth advisers require net worth of $ 100,000 or more).


A robo-advisor is an algorithm-based investment management platform that helps people manage their assets while maintaining far lower fees than a human investment advisor can offer.

Ideal for: People who need a minimum of help managing their investments or who don’t have much to get started, as many robo-advisors don’t have a minimum investment.

When to seek help from a financial advisor

Developing (and maintaining) a comprehensive financial plan can be overwhelming. Even after you have a plan in place, a financial advisor will contact you regularly to make sure you’re on the right track. Financial advisers can also help you with big financial decisions, such as planning a wedding or buying a home.

Retirement planning

Unless you’re already retired, you’re probably not sure how to prepare for it. The investment choices are almost limitless, and a financial advisor will help you choose the right mix so you can achieve the type of retirement you desire.

A friend or colleague can only talk about the hottest stocks. A financial advisor, meanwhile, knows what you really need to reach your retirement goals and will help you build a plan to get there.

Estate planning

You may accumulate a lot of wealth, but eventually we will all die. When this happens, all of your assets, including physical assets like a house or a car, will need to be passed on.

For example, should the family house be transferred or sold? How to manage your investments? Estate planning includes making a will, creating trusts, and appointing a benefactor or executor. Your estate plan may also include methods to limit taxes when passing assets to your beneficiaries.

College education fund

College funds, such as 529 plans, are a great way to anticipate your child’s college expenses. These funds allow you to invest the money which can help ease the burden of rising tuition fees. A financial advisor can help you decide which plan is best and how to invest the money.

To buy a house

Buying a home is more than paying a mortgage – there are appraisal fees, closing costs, agent commissions, and more. A financial advisor can help you sort through these costs and decide which repayment term is best for your situation.


How will I know if my advisor is acting in my best interest?

The best way to know that your financial advisor will act in your best interests is to look for one with a fiduciary duty. A fiduciary duty is a commitment to act in your best interests and not in a way that maximizes income or profit. A good test: Ask potential advisers if they are willing to put their fiduciary duty in writing, then ask them to do so.

Another thing to look for is a fee-only financial advisor. Commission-based financial advisors earn money for the sale of certain investments that may not be in the best interests of their clients, while commission-only providers earn a predetermined rate that you pay. This compensation structure aligns the advisor’s interests with yours.

How are financial advisors paid?

The three main modes of remuneration of financial advisers: fees only, fees and commissions. Fee-only financial advisors receive a fee only from their individual clients, typically as a percentage of assets under management (AUM) or an hourly rate. Paid advisers are similar, but they can earn money in other ways, for example through brokerage commissions. Commission-paid financial advisers then earn money solely from the investments you buy or sell.

What are the average fees for a financial advisor?

As stated above, the fees vary depending on how the financial advisor is paid. However, typical fees on an asset-under-management basis are 0.25% to 1% or around $ 150 to $ 400 on an hourly basis.

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