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What Does a Financial Advisor Do, and Do I Need One?

Financial advisors help you manage money, build wealth and achieve goals. We'll outline the services offered by traditional in-person advisors, robo-advisors and online planning services.
Sept. 6, 2019
Advisors, Financial Planning, Investing
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Financial advisors help you create a plan for meeting your financial goals, and guide your progress along the way. They can help you save more, invest wisely or reduce debt.

What do financial advisors do?

A financial advisor takes a holistic look at your financial situation by assessing your income, assets — such as a home — and debt. The advisor will use that information to help you plan for your goals and select appropriate investments.

Financial advisors may also help you navigate complex financial situations such as paying down debt, tax planning or ensuring you have the right insurance coverage to protect against financial risks. Many will coordinate with outside experts as needed, including insurance agents or tax specialists.

» Learn more: What is a financial advisor? 

In some cases, you can pick and choose which services you want or need based on the type of advisor you select. A financial advisor can be anything from a local, human advisor offering personalized, hands-on guidance to a so-called robo-advisor offering automated, computer-based investment management. That wide range includes online financial planning services, which marry the lower costs of a robo-advisor with the holistic guidance of a human advisor.

Here’s a look at all three types of financial advisors, and when you might choose each:

What a robo-advisor does

If you’re looking to invest for retirement or another goal, a robo-advisor can be a great solution. They’re almost always the lowest-cost option, and their computer algorithms will set up and manage an investment portfolio for you. Here’s what to expect from a robo-advisor:

  • Your first interaction will most likely be a questionnaire from the company you’ve selected as your provider. The questions help identify your goals, investing preferences and risk tolerance.
  • Based on the information you provide, the robo-advisor’s algorithm will recommend an investment portfolio that’s typically built using low-cost exchange-traded funds and index funds.
  • The service will then provide ongoing investment management, automatically rebalancing your investments as needed and taking steps to reduce your investment tax bill.

Do you need a robo-advisor?

The low-cost, easy entry nature of robo-advisors make them a good choice for many consumers:

You need to get started on saving for retirement but aren’t sure where to begin.

You want to start benefiting from stock market returns but don’t have a lot of time to learn how to invest.

You have a lump sum you want to invest and grow for one or more future financial goals.

You don’t have much money to invest yet — robo-advisors typically have a low or no account minimums.

Sound like the right fit? Check out NerdWallet’s picks for the best robo-advisors.

What an online financial advisor does

Online financial planning services offer investment management combined with virtual financial planning. On the low end, these services function like hybrid robo-advisors: Your investments are managed by computer algorithms, but you’ll have access to a team of financial advisors who can answer your specific financial-planning questions.

At the other end of the spectrum are holistic services that pair each client with a dedicated certified financial planner, a highly credentialed expert. The CFP will manage your investments and create a personalized financial plan to help you meet your goals. This type of online planning service offers much of what you’d get from a traditional in-person financial advisor, but meetings are held by video or phone. The cost is higher than you’ll pay for a robo-advisor, but lower than you’d pay a traditional financial advisor.

Do you need an online financial advisor?

For many people, this model is the right fit — it combines lower costs with a high level of service. Consider an online financial planning service if:

You want to work with a human advisor, but don’t mind meeting that advisor by phone or video. You’ll save money by meeting virtually, but still receive investment management and a holistic, personalized financial plan.

You want to pick and choose which financial advice you receive. Some services, like Facet Weath, charge a flat fee based on the complexity of the advice you need (and investment management is included). Others, like Betterment, charge a fee for investment management and offer a la carte planning sessions with a CFP.

» Where should you begin? Read more about how to choose a financial advisor.

What a traditional, in-person financial advisor does

The catch-all term “financial advisor” refers to people with a variety of designations, including CFP or registered investment advisor. Here’s what to expect:

  • You’ll likely meet in person at a local office.
  • The advisor will provide holistic planning and assistance to help you achieve financial goals.
  • You’ll have in-depth conversations about your finances, short- and long-term goals, existing investments and tolerance for investing risk, among other topics.
  • Your advisor will work with you to create a plan tailored to your needs: retirement planning, investment help, insurance coverage, etc.

Do you need a traditional financial advisor?

Human advisors generally cost more than robo-advisors and online services, and may have minimum investment requirements of $250,000 or more. But you may decide to go for it if:

You’re undergoing or planning a big life change, such as getting married or divorced, having a baby, buying a house, taking care of aging parents or starting a business.

Your investments have grown or your financial life has gained complexity beyond what a robo-advisor or online advisor can handle.

You want to meet with someone in person, and you’re willing to pay more for it.

Hire an advisor you’ll be comfortable working with and, of course, one who’s qualified — ideally a fiduciary, meaning she’s required to put your interests first.

» Want specific recommendations? Find a financial advisor that works for you, or compare some of our recommended robo-advisors and online planning services below:

Robo-advisors
Betterment
Why we like Betterment:

Betterment is the largest independent robo-advisor, with low management fees. Clients can upgrade to Betterment Premium for access to financial advisors.

» Read our full review
Management fee: 0.25% to 0.40%

Account minimum: $0 ($100,000 for Betterment Premium)

Promotion: Up to 1 year free management with qualifying deposit.
SoFi Automated Investing

Why we like SoFi:

SoFi charges no management fee and offers unlimited access to a team of CFPs.

» Read our full review
Management fee: 0%

Account minimum: $0

Promotion: Free career coaching, plus loan discounts with qualifying deposits.
Wealthfront

Why we like Wealthfront:

Wealthfront is strictly digital, with powerful financial planning tools and a low management fee.

» Read our full review
Management fee: 0.25%

Account minimum: $500

Promotion: $5,000 managed free for NerdWallet readers.
Online financial planning services
Facet Wealth

Why we like Facet Wealth:

Facet Wealth offers dedicated CFPs and charges a flat fee based on how much financial advice you require. Investment management is included.

» Read our full review
Management fee: $480 to $5,000 per year.

Account minimum: $0

Personal Capital

Why we like Personal Capital:

Personal Capital offers dedicated CFPs and charges a percentage of assets under management.

» Read our full review
Management fee: 0.89%

Account minimum: $100,000

Promotion: 2 free months of financial advisory services for NerdWallet readers.
Compare more advisors

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