October 3, 2023

What is a Financial Advisor?

Financial advisors are experts in providing professional financial services and advice to individuals, businesses and governments. These services may include investment advice such as pension planning, portfolio review, and asset allocation. This may also include insurance sales, estate planning, and retirement plan management.

This financial professional is simply someone who helps investors meet their financial goals and obligations. Investors retain control of their assets at all times unless they provide investment discretion to advisors. Most advisors are bound by a legal fiduciary responsibility to always act in the best interests of their clients.

Financial advisors use investment vehicles such as stocks, bonds, mutual funds, options, and futures to meet the needs of their clients. The type of investment services provided is based on risk tolerance, financial history, income requirements and other determining factors specified by the client.

These professionals are rewarded in a few different ways. A growing trend in rewards includes paid advisors. Commission-only investment advisors charge a percentage of their client’s assets under management. For example, if a client wants an advisor to manage 100,000 and the advisor charges 1% of their assets, the fee is 1000 per year. Other advisors are known as fee-based advisors. This is an old compensation method that includes both fees and commissions.

How to Hire a Financial Advisor

As with anything else, not all advisors are created equal. Follow the steps below when hiring a new professional for the first time.

Ask your advisors who they are, what services they provide, and how they are compensated.

Ask if they are affiliated with a broker/dealer. Brokers/dealers are usually less accountable to their clients and more interested in generating commissions. It is best to hire an independent investment advisor who is not affiliated with anyone. This will ensure your advisor’s objectivity when helping you achieve your goals.

If you are interviewing a financial advisor who is both a stockbroker and an investment advisor, you should be clear about what competencies you will be offered. Investment advisors hold a much higher standard. When seeking financial advice, you should generally seek the help of an investment advisor.

Ask your financial advisor about typical customer types. Make sure you can provide general feedback on how to help your customers.

Find out who your competitors are and what makes them better.

Ask how you are measuring your progress and what your advisor’s goals are for your account.

When looking for a financial advisor, the first place you should look is your family and friends. They will provide the most honest feedback.

If possible, seek out a financial advisor who is continuously educating you. Financial regulations are constantly changing and trained advisors will provide better advice.

Where to find a financial advisor

When looking for a financial advisor, it’s best to search locally. Local advisors have better insight when it comes to understanding the needs of their community and providing advice.

Larger companies are well known, but may not be the best choice. In many cases, they are limited to providing specific types of advice. Other times, we may be too busy to provide you with a reasonable level of service.

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