What is a Financial Advisor

Written by: Nik Ventouris

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A financial advisor is a professional who helps individuals and businesses make informed decisions about managing money and investments. They offer guidance on financial planning, investing, retirement, taxes, and more in order to help clients achieve their financial goals.

In this What is a Financial Advisor article, we’ll explore the different types of financial advisors, delineate what they do, and break down how you can build a successful career in this industry.

What Does a Financial Advisor Do

Financial advising is a complex field that encompasses various roles, responsibilities, and titles.

Let’s take a brief look at the types of financial advisors below.

Types of Financial Advisors

1. Investment Advisors

Investment advisors are responsible for providing investment advice to their clients, often directly managing their assets. In order to offer these services, you must register with a regulatory body such as the SEC or the Financial Industry Regulatory Authority (FINRA).

2. Broker-Dealers and Brokers

Broker-dealers play a dual role in the financial industry, acting as both brokers and dealers. As brokers, they connect buyers and sellers, facilitating transactions between them. As dealers, they buy and sell securities on their own account. In their capacity as financial advisors, broker-dealers offer expert advice and guidance on investment strategies tailored to individual needs and goals.

3. Certified Financial Planner (CFP)

CFPs undergo rigorous training, including a certification exam, and uphold high ethical standards. They offer guidance on areas like debt management and retirement planning and maintain a fiduciary duty to their clients.

4. Financial Consultant

The term “financial consultant” is broad, and can include several different designations, such as the Chartered Financial Consultant (ChFC) certification.

Similar to CFPs and CFAs, ChFCs must adhere to strict ethical standards when operating.

5. Financial Coach

Financial coaches focus on financial literacy and basics like saving and spending. While they may not necessarily hold a fiduciary duty, they can still be instrumental in helping clients build wealth for future management.

6. Investment Portfolio and Asset Managers

These professionals manage client investment portfolios and may offer other planning services. You’ll require a deep understanding of financial markets and investment strategies, as well as how to tailor services to individual client needs.

Additionally, in carrying out these responsibilities, it’s crucial to be aware of the obligations you’ll owe to clients, particularly in terms of fiduciary status.

7. Wealth Advisors

Wealth advisors, also known as wealth managers, provide holistic financial planning for affluent clients. Their services include tax planning, mutual funds investment, and portfolio management of stocks, bonds, and securities. With a fiduciary responsibility to their clients, they prioritize their client’s needs, offering tailored strategies for financial success.

If this sounds appealing to you, a career as a financial advisor may be for you. Check out our How to Become a Financial Advisor article to find out how you can kick-start your career today.

How to Become a Financial Advisor

Becoming a good financial advisor involves various educational paths and licensing, depending on the specific role and whether there is a fiduciary duty involved.

Large firms are a common starting point for financial advisors — here, you’ll spend time meeting with clients, performing analyses, executing financial plans, and networking. This also lays the foundations to be able to branch out to start your own businesses or work as a Registered Investment Adviser later on.

Financial advisors generally supplement a bachelor’s degree in finance, business, economics, or a related field with additional certifications or licenses.

Some common ones include:

  • Securities Licenses for Financial Advisors: SIE, Series 6, 7, 63, 65, 66
  • Additional Financial Advisor Certifications: Certified Financial Professional (CFP), Personal Financial Specialist (PFS), Certified Fund Specialist (CFS), Chartered Financial Analyst (CFA), and Chartered Financial Consultant (ChFC)

These certifications provide credibility and expertise in various financial markets and specialized areas.

Ultimately, the exact combination of certifications you’ll need to work as a financial advisor will vary depending on the unique responsibilities of your role, as well as on if you will be working with securities.

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Tips for Building Your Career

Below, we’ve broken down some key tips to help guide you on the path to success in the financial advising field.

  • Seek Internships: Gain hands-on experience through internships, which can lead to full-time job offers
  • Build Strong Communication Skills: Effective communication is key to understanding clients’ needs and promoting your services
  • Join Professional Associations: Networking with other financial professionals and staying updated on industry trends can help you grow your career
  • Consider Further Education: Pursuing a Master’s in Business Administration (MBA) or additional certifications can enhance your expertise
  • Focus on Client Needs: Providing personalized services and acting in the best financial interest of your clients builds trust and a successful career

Use these tips as a roadmap to become a financial advisor. By focusing on hands-on experience, communication, networking, education, and client satisfaction, you can lay a strong foundation for a rewarding career.

Note: Remember, consistent effort and adaptability to the changing financial landscape are vital in sustaining long-term success in this field.

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What is a Financial Advisor FAQ

What does a financial advisor actually do?

A financial advisor is a professional who helps individuals and organizations manage their finances. They assist clients in understanding various investment options and strategies, create a roadmap for clients to save and invest wisely for retirement, analyze financial risks, and recommend suitable insurance products. 
Interested in finding out more? Take a look at our What is a Financial Advisor article.

How do financial advisors get paid?

Financial advisors typically earn through various methods, including flat fees for specific services, a percentage of the assets they manage, or commissions on products they sell. Some may combine these methods to align with different client needs and investment strategies.

Is it worth it to have a financial advisor?

Yes, having a financial advisor can be worth it for personal finance planning, expertise in investments, and retirement strategies. It’s essential to consider your individual needs and financial goals, as well as to ensure the financial advisor cost aligns with your situation.

What is the difference between a financial planner and an advisor?

Financial planners generally focus on creating comprehensive long-term financial plans, while financial advisors, on the other hand, specialize in more specific areas like investments or insurance. There’s some overlap, as both aim to help clients manage their financial goals.

How do I become a financial advisor?

To become a financial advisor, you need to earn a degree in finance or a related field, obtain relevant certifications, and gain experience in the industry. You must also acquire the necessary licenses and build a clientele through effective networking and relationship management. Interested in pursuing a role as a financial advisor? Check out our How to Become a Financial Advisor article.

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For all related articles, have a look at our Financial Advisor Resources page.