What Is A Financial Advisor and What Do They Do?

November 2, 2024 DINARRECAPS8

Robin Hartill, CFP® Thu, October 31, 2024 Yahoo Personal Finance

If you need help managing your money or you’re not sure whether you’re on track for a major life goal, a financial advisor can be an important ally.

A financial advisor is a professional who helps you create and implement a financial plan, manage your finances, and monitor your progress as you work toward your fiscal goals.

But the term “financial advisor” is a fairly broad one. Financial advisors often hold various licenses and certifications, but there’s no specific credential that someone needs to hold in order to call themself a financial advisor — though many common services financial advisors provide, like buying and selling securities, do require a license. That makes it extra important to vet an advisor and make sure they’re qualified to help you manage your money.

If you’re debating whether to hire a financial advisor and aren’t sure where to start, you’re in the right place. In this article, you’ll learn about the different types of financial advisors, what financial advisors do, how much a financial advisor costs, and how to choose the best advisor for you, including knowing which questions to ask.

Types of financial advisors

There are many different titles a financial advisor can go by, each of which has different requirements. Many of the types of financial advisors listed below work as personal financial advisors, meaning they primarily provide advice to individuals. However, some of the professionals listed below may focus on advising corporations or organizations instead.

When you decide what type of advisor you want to work with, it’s important to understand the difference between a fiduciary vs. non-fiduciary advisor. Many (but not all) financial advisors are held to a fiduciary standard, which means they’re required to act in their client’s best interest. A fiduciary must disclose any potential conflict of interest to the client up-front.

Other types of advisors are only held to what’s known as a suitability standard. That means they’re required to make recommendations they believe are appropriate for their client’s needs.

Investment ‘advisers’

An investment “adviser” is paid to provide advice about securities like stocks and bonds. Anyone who provides investment advice (as most financial “advisors” do) must register with either the U.S. Securities and Exchange Commission (SEC) or state securities regulators, depending on the value of assets under management. They’re also required to hold a securities license.