What Does a Financial Advisor do for you?

3 minute read

By Christopher Taylor

What exactly does a financial advisor do? If you find yourself struggling to handle your finances effectively, enlisting the services of a financial advisor could be beneficial. Let’s delve into the role and responsibilities of a financial advisor and determine if engaging one could be the right move for you.

A financial advisor assists in devising strategies to achieve your financial objectives and monitors your progress towards them. They can provide valuable advice on increasing savings, making informed investments, and managing or minimizing debt.

A financial advisor is someone who helps individuals manage their finances directly or indirectly. This broad category encompasses various professionals such as investment managers, financial consultants, and financial planners.

Financial advisors provide various services depending on their specialization, but generally, they evaluate your financial situation — including assets, debts, and expenses — pinpoint areas needing improvement, and assist in creating a financial plan. Common services include:

Depending on your needs, you can select services from different types of advisors. Traditional advisors offer personalized guidance with ongoing fees, robo-advisors provide automated portfolio management at lower costs, and online financial planning services blend affordability with comprehensive human advice.

If you find yourself juggling multiple financial priorities, seeking a structured savings strategy, or aiming to optimize your investments, partnering with a financial advisor could be the solution.

Financial advisors offer a seasoned perspective on your finances, providing a comprehensive assessment and tailored recommendations. They can streamline complex matters like taxes, estate planning, and debt management, while also guiding strategic investment decisions such as impact investing.

The value of a proficient financial advisor or robo-advisor often outweighs the expense, especially if it results in increased savings, reduced expenses, or enhanced long-term planning. Beyond financial gains, their expertise can instill a sense of financial security that is invaluable.

It’s important to note that financial advisors may charge varying fees, typically ranging from 0.25% to 1% of your portfolio annually, or flat fees for specific services. Understanding these costs upfront ensures you choose the advisor whose services align best with your financial goals. (Explore our comprehensive guide on financial advisor costs here.)

A good financial advisor will begin by thoroughly understanding your financial situation and goals. Based on this understanding, they will provide tailored recommendations to improve your financial outlook, covering areas such as:

It’s advisable to schedule regular check-ins with your advisor, ideally once a year, to review your portfolio’s performance and make any necessary adjustments.

When selecting an advisor, it’s essential to interview multiple candidates to find one with whom you feel comfortable discussing your finances. Use our checklist of 10 essential questions to ask when vetting potential advisors.

Robo-Advisors

Robo-advisors are ideal for those looking to invest for retirement or other goals efficiently and affordably. They utilize algorithms to manage investment portfolios, making them accessible even for those with limited initial investments. You may find a robo-advisor suitable if:

What to Expect from a Robo-Advisor:

Online Financial Planning Services

These services blend investment management with virtual financial planning, offering a cost-effective alternative to traditional advisors while providing personalized advice. Consider online planning if:

What to Expect from Online Planning Services:

Traditional, In-Person Financial Advisors

For personalized, hands-on financial guidance, traditional advisors offer a range of services tailored to your specific needs. They typically serve clients with substantial assets and provide holistic financial management. You might opt for a traditional advisor if:

What to Expect from a Traditional Advisor:

Selecting the right financial advisor involves considering several factors tailored to your needs:

Investment Returns with a Financial Advisor

Historically, the stock market has averaged around a 10% annual return, adjusted for inflation and other factors. Your actual returns will depend on your portfolio’s asset allocation, investment horizon, and market conditions.

For instance, a moderate portfolio (typically 60% stocks and 40% fixed income) may not outperform the S&P 500 in a bull market but could provide more stability during downturns. A financial advisor aims to enhance your portfolio’s performance adjusted for risk, though market cycles require patience for optimal results.

Contributor

Tessa Thompson is a passionate writer with a keen eye for uncovering emerging trends and thought-provoking discussions. With a background in journalism and digital media, she has spent years crafting compelling content that informs and engages readers. Her expertise spans a variety of topics, from culture and technology to business and social movements, always delivering insightful perspectives with clarity and depth. When she's not writing, Tessa enjoys exploring new coffee shops, reading historical fiction, and hiking scenic trails in search of inspiration.