The financial advisor services range widely to provide custom investment, personal finance, and retirement planning objectives. No matter the type of financial advice you need, financial advisors can create an individualized plan to address your needs and build the financial future you are looking for over time.
What do Financial Advisors Do?
A financial advisor is a trained, certified professional who helps people manage their money. They do this through various services selected based on your current financial health, goals, and risk tolerance. They can provide guidance and support or help you manage your finances completely.
The term “financial advisor” could refer to a wide range of people who offer financial advice. Most will have some type of specialized skill or focus on the services offered. Here are some examples:
- Investment managers: These professionals focus heavily on building investment-specific strategies for clients.
- Financial planners: These professionals work to create long-term financial plans to build wealth, leave behind an estate, or meet other objectives.
These types of services are not licensed. They do not have specific certifications. However, you can select a financial advisor with licensing and training for specific objectives:
- Chartered Financial Consultant: A fiduciary to provide overall financial guidance.
- Certified Financial Planner: This certification indicates the provider is certified to build estate plans, wealth management strategies, and other long-term plans.
- Chartered Financial Analyst: This professional is certified to provide financial investment advice.
Always ensure the investment professional you hire has ample training and experience in the field you are most interested in or one of the previously mentioned more broad licenses. Having a good relationship with a financial advisor is important since they tend to be some of the most essential resources for making financial decisions. You’ll want a true professional with a proven track record.
Comprehensive Financial Advisor Services Explained
To find a professional, consider what they can offer to you. Since most will provide help with financial decisions, consider what type of decisions you need and want. As noted, a traditional advisor can offer help across most areas, but choosing a specific professional in one of these areas ensures they have more insight and expertise in that specific area.
Investment Management
Investment management is a comprehensive area of service in which the advisor considers the client’s specific financial needs and abilities, determines which investment strategies to use to work towards those goals, and then manages the processes. There are several key services investment managers can offer:
- Analysis of strategic asset allocation: The investment professional will analyze various investment options and create a strategic asset plan that minimizes risk and can help support the investor’s objectives.
- Portfolio diversification: Strategies to mitigate much of the risk that occurs in all financial planning and wealth building by spreading out that risk
- Active vs. passive management: Depending on the client’s needs, investment management may include actively managing and adjusting strategies as market conditions warrant, while passive management is more about investments put in place and left to grow over time.
- Risk-adjusted returns: Investment managers also create strategies that balance strategic asset management with risk considerations.
Planning for Retirement with Financial Advisors
Retirement accounts are one of the main services financial advisors offer. Their objective is to inform individuals about the various types of retirement accounts available to them and help set up and manage those investment recommendations to build wealth, reduce tax liabilities, and create the financial independence a person wants in their retirement years. Among the services they offer include:
- Building retirement income planning strategies: Develop strategies that allow people to have multiple income streams during their retirement years without working.
- Social Security optimization: Knowing when to take Social Security to maximize outcomes is also a helpful tool.
- Longevity risk management: Beyond basic investment advice, these professionals also offer a range of details about building a solid financial future that lasts throughout a person’s life and onward.
Tax Planning and Optimization
Many financial advisors have specific skill sets related to other licenses they have. Some have a tax background, which means they typically work closely with people to create tax-mitigating strategies. Their objectives are to help create a financial plan that builds wealth but minimizes tax obligations that come from being in a higher tax bracket. Some are Certified Public Accountants (CPAs) who specifically work to reduce client taxes and investment-related taxation.
Some of the ways these advisors can help include:
- Creating tax-efficient investment strategies: These strategies, including harvesting losses, capital gains management, rebalancing, and asset allocation methods, help build wealth while minimizing taxation risk.
- Year-round tax planning: Not only does this type of financial advisor help with taxes during tax filing season, but they also provide guidance throughout the year on ways to reduce tax obligations.
- Collaboration with tax professionals: Many will work with a tax professional to create strategies to reduce tax obligations based on current tax law.
Estate Planning and Wealth Transfer
Estate planning financial advisors, including those who hold a Chartered Life Underwriter or Chartered Retirement Plan Counselor license, provide specific strategies for building wealth and passing that wealth on to future generations. They do this through a range of financial products during a person’s lifetime but also use wills and trusts to move that money from one person to their heir over time. Some of the services these advisors can offer include:
- Creation of wills and trusts: Wills work to communicate a person’s wishes for their assets after death, while trusts help preserve those assets in a probate-protected strategy as the funds transfer to heirs.
- Durable powers of attorney: Putting clients in charge is always the objective, but a Durable Power of Attorney can also help with decision-making when the client cannot do so. This could be assigned to the advisor or a third party, such as a family member.
- Minimizing estate taxes: Financial assets typically face estate taxes depending on their value after a person dies. Financial professionals work to minimize the impact of such taxes by devising legally effective ways to avoid them.
- Wealth preservation: Financial advisors help minimize risk, taxes, and other implications on the value of the estate over time, preserving the estate’s value long term.
Additional Financial Services Offered
Advisors often offer investment advice, but they can do that in multiple ways. The services offered by the financial advisor depend on your needs. Some additional services include:
- Education planning: Helping parents and families establish college trusts for those who are younger heirs and growing the value of those funds over time.
- Charitable giving: Determining how and where to invest and maximizing tax savings.
- Healthcare planning: Financial advisors can help create a plan for long-term healthcare needs, which may include paying for advanced in-home help or medical care at a nursing home.
- Business succession planning: This helps create an investment plan for future generations that will own and manage the business and a strategy for mitigating losses to the company when the owner dies.
From personal finance to setting up initial financial goals, financial advisors are critically important professionals to introduce into your planning and financial life. Having an investment portfolio and established financial goals enables people to know how to put money away to achieve their various objectives and needs.
From stock market and mutual funds investing to providing full-service financial advisor services that cover all of these areas, choose a professional who can help you work towards your financial objectives.
Various Types of Financial Advisors and Their Specialties
The following are some of the most common types of financial advisors and the services they offer:
- Investment Advisors: These are professionals registered with the Financial Industry Regulatory Authority (FINRA) who are paid to provide investment advice to clients.
- Broker-Dealers and Brokerage Services: These professionals can buy and sell stocks, bonds, and mutual funds on behalf of their clients. They are registered with the SEC and are FINRA members.
- Certified Financial Planner: After extensive training and passing a board exam, a Certified Financial Planner provides retirement planning, debt repayment strategies, and investment management.
- Financial Consultant: This professional could be a chartered financial consultant who provides financial planning and guidance for various situations.
- Financial Coach: A financial coach is more of an initial investment advice service.
- Portfolio and Asset Managers: These professionals manage client investment portfolios, including buying and selling.
- Wealth Managers: Also known as wealth advisors, these professionals help people build wealth over time and often work with the wealthy to protect their investments.
Factors to Consider When Selecting an Advisor
Choosing a financial advisor is a significant decision because the financial advice these professionals provide could influence the way your investments perform. While any advisor can help, certain items should be considered before choosing one.
- Evaluating the Effectiveness of a Financial Advisor
To determine who to select, ask questions about how much experience the financial advisor has in critical areas important to you. Ask the advisor about the performance of their investment portfolios over the last year and 10 years.
- Choose an Advisor Based on Your Financial Goals
Even the best financial advisors cannot build wealth for you or achieve objectives if they do not know what your goals are. Choose a financial advisor who helps you to establish those goals, including areas such as:
- Retirement savings
- Trusts and wills
- Investment products for specific goals or needs
- Real estate buying and selling
- Debt management
Establish what you wish to achieve immediately and over the long term with the help of a financial advisor.
- Evaluate Financial Advisor Credentials and Qualifications
When it comes to choosing a financial advisor, always consider the following:
- Their education and training in the field that are specifically important to you
- How they work to provide objective advice while focusing on your best interests
- Their financial planner tools and willingness to work with strategies important to you
- If they are a good financial advisor in terms of the success they have had with others
- What financial institution, if any, they work with
Choose a financial advisor based on their education, training, and experience, but also one that offers the investment options you want and has the personality you feel confident working with on your needs.
- Assess Your Compatibility and Communication Style
While many people think about a financial advisors cost or the financial advisors charges for various services, it helps to look a bit further into who they are and how they can help you. Look for a financial advisor who is willing to talk to you openly and honestly about your options. A good financial advisor will always focus on your best interests, not necessarily making decisions for their own personal gain.
Conclusion
Financial advisors provide a range of investment-focused support for their clients. They take your goals and work to make them a reality. Choose a financial advisor capable of providing you with the level of support and guidance you need. That’s critical to getting the best possible outcome in your situation. An advisor can help with a wide range of needs and services based on the financial goals you communicate to them.
There is much to consider when you are choosing the ideal financial planning professional for you. Avoid making that decision on your own. Instead, use Our Free Advisor Match Tool to help you find the person you want to work with to build your wealth.