What does a financial advisor do, and should you hire one?

What does a financial advisor do?

Financial advisors help you make the most of your money. They offer a range of services. Some of them are more hands-on than others.

An advisor might:

• Review your income, assets, and expenses
• Pinpoint your goals
• Teach you investing basics
• Offer tips for improvement
• Craft a plan to help you reach your goals
• Answer questions
• Manage your investments

There are different types of advisors. Each of them offers different levels and styles of service.

Turn data into insights with Excel

Make better decisions backed by data and insights

Learn More

What kinds of financial advisors are there?

Financial advisors come in many forms. Your personal state of affairs will help you choose the type that works best for you. Common categories of advisors include:

 

Traditional advisors

These advisors often work in person. In general, they cost more than other options. They provide personal service. They can also handle complex challenges. Traditional advisors might be:

• Certified Financial Planners (CFPs). CFPs have a strong background in advising. They have to earn their CFP title from the Certified Financial Planner Board of Standards.
• Brokers. Brokers.
• Registered investment advisors (RIAs). RIAs offer advice about your investments for a fee. Sometimes they will provide general financial advice, too. They have to register with the SEC or a state regulator.
• Wealth managers. Wealth managers handle large accounts. They work for clients with many assets and investments.

 

Online advisors

These advisors work with you through phone and video calls. They offer tailored advice and planning. Some of them will also manage your investments. You will spend less money on online advisors than in-person options. Robo advisors are even less costly.

 

Robo advisors

These advisors are programmed to help you with basic tasks. For example, they can suggest stocks to invest in based on your answers to a set of questions. They are the least expensive type of advisor. You can also use these services to invest small amounts of money.

Why might I need a financial advisor?

There are many reasons you might need a financial advisor.

For example, you might:

• Be struggling to identify financial goals
• Not know how to begin tackling your debt
• Have little knowledge about finances and no time to learn
• Feel overwhelmed about your financial situation

In these cases, you should take a hard look at the pros and cons of using a financial advisor.

What are the pros and cons of using a financial advisor?

There are pros and cons to using a financial advisor. Before leaping, you’ll want to consider the following.

An advisor can:

• Save you time.
• Make the most of your income and assets.
• Offer reassurance about the financial process.
• Share knowledge that you can use in the future.

On the other hand, an advisor will:

• Require you to share your financial status, which may make you feel ill at ease
• Expand your investments, which may make you feel out of control
• Cost you money

Weigh these pros and cons before deciding whether you want to use a financial advisor. In many cases, different types of advisors offer particular benefits. For example, if you don’t want to spend a lot of money, you could choose a robo advisor. These advisors are the least costly.

How can I track my finances?

You might consider the personal management of your finances. This option will take longer at first because there is a lot to learn. However, it can save you money upfront.

Start just like an advisor would. Track and review your finances. Use a tool like Excel to keep records. You should record:

• Investments
• Assets
• Bills
• Monthly expenses

After you record this information, zero in on where you can improve. Once you know where you’d like to start, begin your research about investments and other key wealth-building strategies.

Do you need a financial advisor?

So, do you need a financial advisor? They can help you earn or save more money quickly. However, they can cost a lot. If you have the time and a gift for research, you might be able to manage your finances by yourself.