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What Is a Financial Advisor?

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 13, 2022

A Financial Advisor is someone who can help you manage your assets, investments, and income. Financial Advisors are also people who can help you plan for your future by saving money or planning out what to do with your money after you retire. 

Financial Advisors are normally members of the National Association of Personal Financial Advisors (NAPFA) but this is not always the case. 

Financial Advisors are people who have passed the Financial Planner Certification Examination (FPS) or can be Financial Planners, Chartered Financial Consultants, or Chartered Financial Analysts. 

Qualifications and Criteria to Become Financial Advisors

Advisors are normally members of the Financial Planning Association (FPA). 

  • Financial advisors have a Bachelor’s Degree or higher. 
  • Financial Advisors have passed either the Financial Planners Certification Examination or the Life, Health, and Social Insurance License Law Examination.
  • Financial Advisors have a required level of expertise when it comes to all different types of investments and how these investments will affect their clients’ financial future.

Duties and Responsibilities of Financial Advisors 

Advisors are put in place to help educate clients about different financial strategies that could benefit them. 

  1. Financial Advisors do not take orders from their clients but they will offer advice to help clients make or save money which will benefit them in the long run.
  2. Financial Advisors’ job is to understand their client’s financial goals and reach these goals by setting up a strategy that will help them get there.
  3. Financial Advisors must also disclose any conflicts of interests such as commissions, fees, or other forms of monetary gain to their clients.

Types of Financial Advisors

There are different types of Financial Advisors. Financial advisors can either fit into these categories or they can be a combination of two or more types. These are the most common Financial Advisor Types:

Fee-Only Financial Advisor 

Fee-only Financial Advisors offer their clients advice and not any products. Their services do not include commissions and the Financial Advisor only gets paid by the client by either a flat rate fee or an hourly rate. 

Fee-only Financial Advisors charge for their services but they will let their clients know how much before beginning to work. 

Commission-Based Financial Advisor 

Commission-based Financial Advisors are Financial Advisors that earn commissions from insurance or other products when they sell them to clients. 

Commission-based Financial Advisors may also receive a fee from their clients in addition to the commissions. They normally charge a yearly fee for their services but they can also be paid hourly or by the project.

Fee-Based Financial Advisor 

A fee-based Financial Advisor falls halfway between a commission-based Financial Advisor and a Fee-only Financial Advisor. A fee-based Financial Advisor gets paid a combination of both a commission and a fee from the client. 

The Financial Advisor will receive a percentage of commissions from insurance or other products they sell to clients but will also charge a yearly fee for their services. 

Financial Planner vs Financial Advisor 

Financial Planners and Financial Advisors work by the same standards but Financial Planners have a higher set of standards. 

Financial Planners are required to have Certified Financial Planner’s ( CFP ) after their names while Financial Advisors are not. 

How Do Financial Advisors Work 

Financial Advisors work by asking questions to understand their client’s financial situation. 

Financial Advisors help their clients objectively see their money. This gives the Financial Advisor a better understanding of what actions they need to take to get them where they want to be financial. 

Financial Advisors will usually ask the following questions: 

  1. What types of investments does the client already have? 
  2. How much money is needed to meet short-term and long-term goals? 
  3. What are the client’s income sources? 
  4. What are their expenses? 

Financial Advisors also go over taxes with their clients. Financial Advisors make sure the client understands all their options when it comes to taxes. 

Financial Advisors will help the client strategize on how best to reduce their tax bills while still spending money on things they need.

Benefits of Having a Financial Advisor 

Benefits of Having a Financial Advisor

The benefits of having a Financial Advisor are that Financial Advisors can help clients by: 

Helping Them Stay on Track 

Financial Advisors can help their clients stay on track. Financial Advisors can remind the client of savings and investment goals to make sure they are meeting them. 

Offering Objective Advice

Financial Advisors will give their clients objective advice about their money without bias or influence from others. Financial Advisors also offer financial education to clients so they can be well educated when it comes to financial decisions. 

Plan for Emergencies 

Financial Advisors help their clients prepare for the unknown by planning for things like medical emergencies and other financial emergencies. Financial Advisors will explore different options with their clients so they can be financially prepared in case something happens. 

Financial Advisors also help clients get money when needed such as putting together a Financial Plan for parents to get money for a down payment on a house or Financial Plan for children who want their own Financial Future. 

Taxes 

Financial Advisors help clients by finding tax savings and deductions they qualify for when filing their taxes. Financial Advisors make sure their client’s money is being spent in the best way possible for them so they get the most out of their money. 

Save on Fees 

Financial Advisors are usually paid by the hour or by project instead of being paid commission. Financial Advisors don’t have to worry about sales quotas so they can focus more on helping their clients know how to invest for Financial Success. 

What You Should Look For When Choosing Financial Advisors

Since Financial Advisors are not regulated, finding the right Financial Advisor for you will be important in getting the best service possible. Here are some factors that should be considered when finding Financial Advisors:

1. Experience

Financial Advisors should be experienced in the field of finance. The more experience they have, the better service you will receive. 

2. Licensing and Financial Industry Experience

Financial Advisors should be licensed and knowledgeable about various products that can help their clients. Financial Advisors’ knowledge should encompass all Financial Areas.

3. Fee Structure

Financial Advisors are usually paid either hourly or by project so they can focus more on helping their client know how to invest for Financial Success.

4. Client relationship

A successful Financial Advisor will develop long-lasting Client Relationships. Financial Advisors who are good Financial Advisors will promise Financial Success and not Financial Products.

5. Relationships

Financial Advisors should be in good standing with Financial Institutions to help their clients by finding out Financial Information about different Financial Institutions. 

6. Income Levels

Financial Advisors should know Financial products that can help clients regardless of their Financial Income Level.

7. Client’s Goals

Financial Advisors should be able to Financial Align with their client by finding out what Financial Goals they are trying to achieve then using Financial Products that can help clients meet those goals. 

8. Other Qualities

Financial Advisors should have Financial knowledge about tax benefits, Financial Planning, Retirement, etc. Financial Advisors should be able to help their clients in Financial Situations and not Financial Products.

Knowing the right qualifications of a good financial advisor is one thing but finding the right one for you is another. Interviewing a couple of financial advisors may be the best way to know which one is best for you. To know what good questions to ask a financial advisor, read this article: 12 Questions to Ask a Financial Advisor

Final Thoughts 

Finding a Financial Advisor can be a Financial Advantage for any Financial Situation. Financial Advisors will take the time to determine what Financial Goals they want to achieve then use Financial Products that can help clients meet those goals. 

Financial Advisors are Financial Professionals who Financial Align with their client's Financial Goals. Financial Advisors can be asked to do Financial Planning, Retirement Planning, Insurance Needs Analysis, and Financial Review.
A Financial Advisor will help you in all financial areas so you don't have to worry about your Financial Situation. Financial Advisors will Financial Review your Financial Goals and Financial Products that can help you achieve Financial Success.
You should look for an advisor who meets your Financial Needs, has the Financial Experience necessary to help you, uses a Fee Structure that works best for you, and uses Financial Practices that you feel comfortable with.
Financial Planning is Financial Goal Setting. You Financial Plan your Financial Goals then Financial Align with Financial Products that can help you achieve those goals.
Financial Advisors can be paid either by Project or Hourly depending on how much Financial Planning they are doing and what their Fee Structure is based on.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.