What Financial Advisors Do? A Comprehensive Guide

Financial advisors are your fiscal navigators, guiding you through investment options, tax laws, and retirement plans. They craft personalized strategies to manage your wealth, mitigate risks, and secure a prosperous financial future. Trust in their expertise to build and protect your assets.

Are you looking to achieve financial success but don’t know where to start? “What financial advisors do” might be the question on your mind. Financial advisors can be your guiding light, helping you navigate the complex world of personal finance. In this comprehensive guide, we’ll delve into the roles, types, and benefits of financial advisors, equipping you with the knowledge to make informed decisions and secure your financial future. Buckle up and get ready for an exciting journey towards financial prosperity!

Key Takeaways

  • Financial advisors provide specialized services tailored to their clients’ financial needs and goals.

  • Different types of financial advisors, such as CFPs, Investment Advisors, and Wealth Managers, can offer comprehensive advice.

  • Carefully consider qualifications, fees & fiduciary/suitability standards when selecting a suitable advisor for your individual needs.

The Role of Financial Advisors

A financial advisor helping a client to plan their financial future

Financial advisors play a crucial role in helping clients achieve their financial goals. They offer services such as investment management, financial planning, and wealth management tailored to individual needs and circumstances.

A good financial advisor uses their expertise to create a personalized financial plan, considering your unique financial situation and aspirations.

Investment Management

Investment management is a key component of a financial advisor’s role. They are responsible for constructing and overseeing investment portfolios, recommending suitable investments, and managing risks. Clients can navigate the investment landscape more effectively, make informed decisions, and maintain a long-term perspective when they work with a seasoned investment professional.

From selecting the most suitable mutual funds to optimizing investment strategies, financial advisors provide invaluable guidance throughout the investment process.

Financial Planning

Financial planning covers various aspects of personal finance, including:

Financial advisors assist clients in formulating strategies to achieve long-term objectives. They can guide on complex financial matters, such as taxes, estate planning, and debt management.

Additionally, they offer assistance with creating a tax-efficient estate plan and capitalizing on tax breaks and deductions. Working with a financial planner allows clients to gain a comprehensive understanding of their financial situation, which simplifies the process of setting and achieving their financial goals through financial planning services.

Wealth Management

Wealth management is a comprehensive service tailored to the needs of high-net-worth clients, encompassing investment management, tax planning, and estate planning. Wealth managers offer various services, including tax planning, family foundation management, philanthropic planning, and legal services.

Clients with substantial wealth or large estates can receive personalized advice and guidance on managing their financial assets, ensuring their long-term financial stability and success when they work with a wealth manager.

Types of Financial Advisors

There are various types of financial advisors, each with specific expertise and qualifications. Some common types include Certified Financial Planners (CFP), Investment Advisors, and Wealth Managers. Depending on your financial needs and goals, you may choose to work with one or a combination of these professionals to ensure that you receive the most comprehensive advice possible.

Certified Financial Planner (CFP)

Certified Financial Planners (CFP) are professionals who have completed rigorous education and testing requirements, specializing in comprehensive financial planning. Clients can benefit from an extensive understanding of various financial matters and receive individualized advice tailored to meet their specific financial objectives when they work with a CFP.

Additionally, CFPs are held to high standards of professionalism and ethics, ensuring they always act in their clients’ best interests.

Investment Advisor

Investment advisors focus on managing clients’ investment portfolios and providing investment advice. They offer a range of services, including:

  • Investment portfolio management

  • Asset allocation

  • Financial planning

  • Tax planning

To become one of the registered investment advisors, individuals must be registered with the Securities and Exchange Commission (SEC) and complete the Series 65 or Series 66 exams.

Their fees typically depend on the percentage of assets under management, or they may charge a flat fee for specific services.

Wealth Manager

Wealth managers cater to high-net-worth clients, offering various financial services and personalized advice. They provide services such as:

  • Investment management

  • Financial planning

  • Estate planning

  • Tax planning

  • Retirement planning

  • Wealth preservation strategies

Wealth managers typically possess a degree in finance, economics, or a related field and may also have certifications such as the Certified Financial Planner (CFP) designation.

How Financial Advisors Operate

Financial advisors can work independently or for larger firms, such as investment firms, banks, and insurance companies. They are registered with regulatory bodies, such as the SEC or the Financial Industry Regulatory Authority (FINRA), ensuring they act in their clients’ best interests.

Working with a financial advisor grants clients access to specialized knowledge and expertise, along with personalized guidance tailored to their unique financial situation and goals.

How Financial Advisors Get Paid

Financial advisors can have various fee structures, including fee-only, fee-based, and commission-based. Fee-only advisors derive their compensation solely from client-paid fees. On the other hand, fee-based advisors may be compensated through two sources: client-paid fees and commissions from vendors for selling securities or insurance products. Understanding a financial advisor’s payment methods before hiring is key, as their fees can range from a flat fee to a percentage of assets under management (AUM).

Do You Need a Financial Advisor?

A financial advisor helping a client to decide if they need a financial advisor

Whether to hire a financial advisor depends on your assets, financial goals, and comfort level with managing your finances. A financial advisor can provide valuable guidance on investment strategies, retirement planning, and other financial matters, helping you make informed decisions and achieve your financial objectives. So, what exactly does a financial advisor do in these situations?

However, weighing the potential benefits against the financial advisor’s cost is vital, as financial advisors can charge various fees depending on their services and fee structure.

Alternatives to Traditional Financial Advisors

If you’re seeking a more cost-effective solution, alternatives to traditional financial advisors include robo-advisors and hybrid models. Robo-advisors are digital platforms that offer low-cost investment management services. They are particularly suitable for those who require assistance with retirement savings or have limited funds to invest.

Hybrid models combine human advice with digital tools, providing a more personalized approach while maintaining cost-efficiency.

Choosing the Right Financial Advisor

An image showing a financial advisor discussing investment options with a client and explaining what does financial advisors do.

Consider the following factors when choosing a financial advisor:

  • Qualifications

  • Experience

  • Fee structure

  • Whether they adhere to a fiduciary or suitability standard

By evaluating these factors, you can ensure that you select the most appropriate financial advisor for your unique needs and goals.

Don’t hesitate to consult multiple financial advisors, as this can enhance the likelihood of making a sound decision and finding the best fit for your financial situation.

Fiduciary Duty and Ethical Considerations

A financial advisor discussing fiduciary duty and ethical considerations with a client

Fiduciary duty requires financial advisors to act in their client’s best interests, foregoing any personal gain. This legal and ethical obligation ensures that your financial advisor provides advice and recommendations that benefit you and your financial goals. Ethical considerations in financial advising also involve transparency, honesty, and adherence to professional standards.

Working with a financial advisor who upholds these values ensures that your financial future is in capable hands.


In conclusion, financial advisors play a vital role in guiding individuals toward financial success. With various roles, types, and fee structures, it’s crucial to find the right advisor that aligns with your unique needs and goals. By understanding the services, qualifications, and ethical considerations of financial advisors, you can make informed decisions and secure your financial future. So, leap and embark on your journey towards financial prosperity with the help of a trusted financial advisor.

Frequently Asked Questions

What is the role of a financial advisor?

A Financial Advisor is responsible for helping individuals create long-term wealth strategies, manage investments, provide financial advice, and develop personalized financial plans. They guide clients toward profitable decisions, cultivate relationships, and stay up-to-date on industry trends.

Is it worth using a financial advisor?

For those who don’t have the time or financial literacy to invest confidently on their own, a financial advisor can be an invaluable asset in helping build a strong financial future. Professional guidance for investment decisions, risk management, and other considerations can also be beneficial, making it worth investing in a financial advisor.

How do financial advisors get paid?

Financial advisors get paid in various ways, including commission on products they sell and investments they recommend, a management fee based on managed assets, a retainer or hourly fee, or a percentage of the assets being managed.

What are the main duties of a financial advisor?

Financial Advisors assess clients’ financial situations, develop personalized financial plans, provide strategic advice on various financial products and services, guide clients toward profitable and secure decisions, help them plan for short- and long-term goals, and stay updated on industry trends.

Patrick Traverse, CFP®, EA, CEPA™

Patrick Traverse, CFP®, EA, CEPA™

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The information provided is intended to be educational in nature and is not intended to be a recommendation for any specific business or tax strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation of services.

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any business or tax planning decisions, an individual should seek individualized advice from a personal financial, tax, legal, or business consultant professional that takes into account all of the particular facts and circumstances of an individual’s own situation. No person associated with Breakaway Financial Group LLC is a licensed attorney, and the information contained herein should not be considered legal advice.