What is a financial advisor, and what do they do?
Unpack the reasons why hiring a financial advisor might be the key to your wealth management. Or answer a few questions below, and we will match you with a financial advisor who is suited to meet your unique needs.
Summary
A financial advisor offers expertise in managing complex areas like investments, taxes, and retirement.
Services financial advisors offer include investment planning, estate management, and debt consolidation to help clients build wealth.
Unbiased will match you with a financial advisor for expert financial advice tailored to your unique financial goals.
What is a financial advisor?
A financial advisor is a professional who helps individuals manage their financial affairs. They offer guidance on a wide range of money-related topics, from investments to retirement planning.
Essentially, a financial advisor helps people make informed decisions about their finances, whether it's determining the best way to grow their wealth, protect their assets, or plan for future financial needs.
Many people turn to financial advisors because they want expert help navigating the complexities of the financial world. It’s not just about investments; good financial advisors also provide valuable advice on budgeting, insurance, estate planning, and much more.
What services do financial advisors provide?
Financial advisors offer a wide array of services tailored to meet the needs of their clients.
Some common services include:
Investment management: Helping clients create and manage investment portfolios to grow their wealth over time.
Retirement planning: Assisting clients in planning for a financially secure retirement by considering factors like savings, retirement accounts, pensions, and Social Security.
Estate planning: Helping people plan for the future distribution of their assets after death, ensuring their estate is managed according to their wishes.
Tax planning: Providing strategies to minimize tax burdens, taking advantage of tax-efficient investment options.
Insurance planning: Reviewing clients’ insurance needs, ensuring adequate coverage for life, health, disability, and other insurances.
What advice do financial advisors provide?
When you ask, “What does a financial advisor do?” The answer lies in providing comprehensive, personalized advice tailored to your unique financial situation.
The best financial advisors offer advice that spans many aspects of financial life.
Some key areas include:
Investment advice: Suggesting the best investment strategies based on the client’s risk tolerance, time horizons, and financial goals.
Retirement advice: Offering guidance on when to retire, how much to save, and which retirement plans to choose.
Tax advice: Recommending strategies to potentially lower tax liabilities, such as tax-deferred accounts or charitable giving.
Estate advice: Helping clients determine how to pass on their wealth efficiently, minimizing taxes and legal complications.
Savings advice: Guiding clients in identifying the best ways to save for short-term goals, such as an emergency fund, or long-term goals, like college education.
How much does a financial advisor cost?
Financial advisor costs vary depending on several factors, including the advisor’s experience, location, and the complexity of the services offered.
Typically, advisor costs are calculated using different pricing structures:
Hourly rate: Many advisors charge by the hour for consultations or specific services. These hourly rates typically range between $120 and $300, depending on the advisor’s expertise.
Fixed rate: For more complex financial planning, advisors may charge a fixed fee. This cost can range from $7,500 to $55,000, depending on the level of service provided and the complexity of the financial strategy.
Commission-based: In some cases, advisors earn commissions on the financial products they sell, such as insurance or investment funds. This cost structure may lead to conflicts of interest, so it’s important to fully understand the fees involved.
Percentage of assets under management (AUM): Another common pricing model is charging a percentage of the client’s assets that the advisor manages. This typically falls between 0.5% and 2% of the client’s assets, deducted monthly based on the current balance.
Whether you’re looking for high-end services or more basic financial planning, understanding financial advisor costs will help you budget appropriately for professional advice.
Why might I need a financial advisor?
There are many reasons why someone might need a financial advisor.
Here are a few examples:
Investing: If you’re interested in building wealth through investing but don’t know where to start, an advisor can help you create a portfolio that matches your goals and risk tolerance.
Tax planning: Reducing your tax burden can be tricky, and an advisor can offer strategies to help keep more of your money in your pocket.
Retirement planning: Good financial advisors can help you determine how much you need to save and where to invest to secure your future when planning for retirement.
Inheritance planning: If you’re navigating an inheritance or looking to pass on wealth to your loved ones, a financial advisor can ensure your estate is distributed efficiently and according to your wishes.
Are there scenarios where I legally need a financial advisor?
In most cases, hiring a financial advisor isn't legally required.
However, managing large estates, complex investments, or acting as a fiduciary or trustee may necessitate professional advice to meet legal obligations and tax regulations.
How do I know if I’m talking to the right financial advisor for my needs?
Finding the best financial advisor for your needs requires assessing a few key factors.
First, ensure that the advisor specializes in the areas most relevant to your financial situation. For example, if you need help with retirement planning, find an advisor with expertise in that area.
You should also look for someone who is a fiduciary, meaning they are legally obligated to act in your best interest.
Good financial advisors will take the time to understand your goals, communicate clearly, and provide transparent information about their fees and services.
What questions should I ask a financial advisor?
Before hiring a financial advisor, ask these five important questions:
Are you a fiduciary? This helps confirm that the advisor is obligated to put your best interests first.
What are your qualifications? Ensure they hold relevant certifications like CFP (Certified Financial Planner).
How do you get paid? Understanding their fee structure will clarify if there are any potential conflicts of interest.
What services do you offer? Confirm the services they provide align with your needs.
What is your investment philosophy? This will help you understand their approach to managing your money.
You can discover more questions you should ask your financial advisor here.
What are the benefits of using a financial advisor?
The benefits of using a financial advisor are substantial:
Expertise: Advisors bring knowledge and experience to guide you through complex financial decisions.
Customized plans: They provide personalized strategies tailored to your unique financial goals and situation.
Time savings: Managing finances can be time-consuming, and an advisor can handle much of the legwork for you.
Reduced stress: Advisors can help you feel more confident and secure about your financial future.
Proactive adjustments: Financial advisors monitor your financial plan and suggest changes when necessary, helping you stay on track toward your goals.
How to find a financial advisor
If you’re looking for a convenient way to find a financial advisor, Unbiased is the place to find an advisor best suited to meet your needs.
Let Unbiased match you with an SEC-regulated financial advisor for financial advice tailored to your financial objectives.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.