A financial advisor can help you make financial decisions or actively manage investment accounts for you. But because the term "financial advisor" is broad and can be used to describe a wide variety of professionals, including investment managers, financial consultants and financial planners, the exact services financial advisors provide can vary. Depending on the type of advisor, typical services may include:
- Building investment plans: They help clients decide how to invest based on goals like retirement, buying a house, college savings, or generating income.
- Recommending investments: This can include stocks, bonds, mutual funds, ETFs, real estate funds, or other assets.
- Managing portfolios: Some advisors directly manage investments for clients, deciding what to buy or sell over time.
- Assessing risk: They evaluate how much risk a client is comfortable taking and match investments accordingly.
- Providing financial guidance: Many also help with retirement planning, tax-efficient investing, estate planning coordination, and budgeting.
- Monitoring and rebalancing accounts: They review portfolios regularly and adjust them when markets or client goals change.
» Looking for an advisor? View our picks for the best financial advisors
In some cases, you can choose which services you want or need based on the type of financial advisor you select. A financial planner, for instance, may only focus on building and analyzing financial plans. They may not give investment advice or manage your assets. Similarly, an investment manager may only give investment advice but not create comprehensive financial plans for you.
You may also want to seek out a professional who is skilled in a specific area — for example, if you need help with complex matters such as taxes, estate planning and debt repayment, or you want guidance on specific investment strategies such as crypto and crypto taxes. This is one reason why it is important to interview several advisors. You want someone who meets your needs and who you feel comfortable opening up to about your finances. For help with that conversation, we cover 10 questions to ask a financial advisor.
» Not sure where to begin? Learn how to choose a financial advisor
How financial advisors get paid
Financial advisors make money in different ways.
- Assets under management (AUM) fees: Some advisors charge an annual fee that is a percentage of the amount of assets they manage for you (your assets under management).
- Fixed rates: Some charge an hourly or flat fee for certain services, such as writing a one-time financial plan or working on special cases, such as helping you through a divorce.
- Commissions: Some get commissions from the products they sell to you (annuities, life insurance, mutual funds, etc.).
- Trading fees: Some charge commissions on trades they place on your behalf.
Some advisors may combine these fee structures. Don’t be afraid to ask an advisor what they charge, and compare their fees to others before moving forward.
» Dive deeper: How much does a financial advisor cost?
When to get a financial advisor
You may want to work with a financial advisor if you:
- Struggle to prioritize your financial goals
- Need a plan for where and how to save
- Want help with investment management
The quiz below can help you decide if it's time to get a financial advisor.
Frequently Asked Questions
What's the difference between a financial advisor and a financial planner?
A financial advisor can be a financial planner or provide financial planning as part of their services. A financial planner usually focuses on creating and analyzing financial plans; they may not provide direct investment advice and/or manage assets.
How do I know if I can trust a financial advisor?
There are many ways to assess an advisor’s reputation. You can look up any registered broker, investment advisor or firm using BrokerCheck, a free service provided by FINRA, the Financial Industry Regulatory Authority. This tool shares background on the advisor’s employment history, licenses and certifications, along with any disciplinary actions or violations the advisor has been subject to while in a broker or advisor capacity.
Seeking an advisor with a certified financial planner designation helps, as they have to meet education, experience, ethics and examination standards. They also must act as a fiduciary, which means they must act in the best interest of their clients.
The firm's reputation, along with the advisor's tenure at that firm, testimonials from existing clients (feel free to ask for names to contact) and your own gut reaction can help provide peace of mind that you’ve selected a trustworthy and experienced advisor. And remember, you always have the power to change advisors at any time.
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