What Does a Financial Advisor Do?

What does a financial advisor do? People who are exploring a career in finance often ask this question. The short answer is that the role of a financial advisor is to work with clients to assess their current financial status and future plans, economic conditions and forecasts, and regulations so that they can give them financial advice. This article offers more detail on the financial advisor's role and shares the steps to follow to become a financial advisor.

What Is a Financial Advisor?

A financial advisor helps clients by giving them financial advice that takes their current financial situation, long-term and short-term goals, and requirements into account. Generally, financial advisors fall into one of these categories:

• Personal financial advisor: A personal financial advisor helps individuals manage their finances and provides advice on investments, insurance, mortgages, college savings, taxes, estate planning, and retirement.
• Investment advisor: An investment advisor provides investment-related advice for a fee. Their focus is strictly on investing, so their work is more limited in scope than that of a personal financial advisor.
• Registered representative: A registered representative can recommend and purchase investment products such as stocks, bonds, and mutual funds for a client based on income, portfolio, risk tolerance, investment objectives, and overall financial situation.
• Wealth management advisor: A wealth management advisor recommends ways that high-net-worth clients can achieve their wealth accumulation, protection, and distribution goals.
• Financial planner: A financial planner helps clients with long-term investment decisions, taxes, and selecting insurance policies and retirement plans.

Regardless of their specific job title, all financial advisors design investment portfolios based on a range of information, including economic trends, regulatory changes, and risk. They are expected to establish trust with their clients and balance their market and investment knowledge to understand of what will work best for each client.

Types of Financial Advisors

There are several types of financial advisors, each with distinct responsibilities, functions, duties, and roles. These include robo advisors, online financial advisors, and in-person financial advisors.

Robo Advisors

Robo advisors are automated investment platforms that provide financial advice based on algorithms and data. Common duties of robo advisors are:

• Helping clients determine the appropriate mix of investments for their goals and risk tolerance.
• Making investment selections using algorithms and trends.
• Monitoring client's portfolios and making adjustments as needed.
• Re-balancing clients' portfolios to ensure that they remain aligned with their goals and risk tolerance.
• Optimizing clients' taxes by selecting investments that are tax-efficient.

Robo advisors can play a valuable role in helping investors reach their financial goals. They are a good option for investors who want a low-cost and automated way to manage their investments. Robo advisors are also a good option for investors who do not have the time or expertise to manage their own investments.

Online Financial Advisor

Online financial advisors provide personalized financial advice through online platforms. Their duties commonly include providing services such as:

• Helping clients create a financial plan that outlines their financial goals and how to achieve them.
• Providing investment advice based on clients' goals and risk tolerance.
• Assisting clients as they plan for retirement and how to choose the right retirement savings and investment options.
• Helping clients plan for their children's education and how to choose the right education savings and investment options.
• Supporting their clients by finding the right insurance policies to protect their client's families and assets.

Online financial advisors typically charge a monthly or annual fee for their services. Some also offer hourly or project-based pricing options.

In-Person Financial Advisors

In-person financial advisors provide comprehensive financial advice to clients in person. They often have a wide range of duties including:

• Creating financial plans that their client's feel comfortable with.
  
• Providing investment advice based on their risk tolerances.
  
• Helping their clients plan for retirement and which strategies align with their goals.
  
• Helping them setup the right education savings plans and investments so that their children and others have the financial assistance they need when it comes to their education.
  
• Evaluating different insurance options.
  
• Creating estate plans that outlines their wishes for their assets after their death.
  
• Helping clients optimize their taxes by selecting investments that are tax-efficient.

In-person financial advisors typically meet with clients regularly to review their financial plans and make any necessary adjustments. They also provide ongoing support and guidance as clients' financial situations change.

It's common for in-person financial advisors to charge a monthly or annual fee for their services. Some in-person financial advisors may also offer hourly or project-based pricing options.

How to Become a Financial Advisor

There are five main steps to become a financial advisor:

1. Earn a bachelor’s degree: Most practicing financial advisors majored in some type of business or finance program.
2. Complete an internship: An internship can help get a sense of what a financial advisor does every day while offering the opportunity to learn from financial advisors. If your internship was mutually successful and satisfying, consider exploring the possibility of an entry-level position after you graduate.
3. Find a finance job: As you prepare to enter the workforce as a financial advisor, consider looking on job websites for positions in large firms and make sure you are prepared if you are asked for an interview. You can learn a lot about how to make cold calls and build a book of business at a large company.
4. Earn the necessary licenses and consider certification: Earning the CFP^® mark or the CFA^® charter can help you specialize or differentiate yourself from your competition. If you sell securities or insurance, you’ll need a license.
5. Pursue additional education: Your job relies on your ability to provide valuable financial advice to clients. Returning to school to earn a graduate degree or doctorate can help you progress in your career as a financial advisor.

Pros & Cons of Becoming a Financial Advisor

A career as a financial advisor can be fulfilling and lucrative, offering the chance to make a positive impact on clients' lives. However, it's important to consider the challenges and drawbacks before embarking on this career path.

Pros Of Becoming A Financial Advisor

• Having a flexible schedule.
• The potential to receive high compensation.Helping clients achieve their financial goals can be very rewarding.
• The opportunity to build strong relationships with clients.
• The ability to make a real difference in people's lives.
• A career that is both challenging and intellectually stimulating.
• The potential for high earnings and career advancement.

Cons Of Becoming A Financial Advisor

• Keeping up with the constant changes in the financial industry can make for a demanding job.
• The pressure to meet sales targets or quotas through prospecting.
• The potential for long hours and irregular work schedules.
• The risk of lawsuits or complaints from clients.
• The need to maintain a high level of ethical standards.

Ready to Get Started?

If a career as a financial advisor appeals to you, get more information about get more information about how to become a financial advisor. You can also read this article to find out how much financial advisors earn.