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A financial advisor can be a very important person in the life of an investor. It’s important to know as much as you can before enlisting the advice of any financial professional. I’m sure you have seen commercials or read somewhere about how a Financial Advisor can help you. But can they? What are they really? Do they really help people with their finances? In this article on financial advisors, I discuss what they are, what they do, why they may be important for you and why you might need one.

Financial Advisor Defined

Financial Advisor and Financial Planner are oftentimes used interchangeably, but it’s not really the case. A financial planner is typically just someone that offers a financial plan or investment plan. In a general sense, an advisor can be defined as any person who is directly involved in the financial decision-making process of another person or entity.

Is a Financial Advisor able to help or can you do better on your own?

A financial advisor typically can do more than a financial planner or specializes in something other than just investment planning. An advisor could also be a certified public accountant (CPA) or a registered investment advisor (RIA). Regardless whether you decide on a financial advisor or a financial planner, they both are able to assist in the investment managing process. Recently, we see “Robo-Advisors” as a common alternative to traditional financial advisors. I go into more detail on them in a later section.

What Could a Financial Advisor Do for You?

Now that we just learned, from a high level perspective what a financial advisor is, as for what they do, they can do almost anything related to finance. If you are someone just starting out and have no idea where to begin on investing, it is important to either; a) do all the research yourself or b) talk to someone who has already done the research for you. Typically, I try not to reinvent the wheel, so I would like to learn from someone who has been there. A financial advisor is someone that has been there and hopefully learned more about this topic than you.

The financial advisor can offer options and strategies that you may not have thought of before. If your main business is working 9 to 5 in software sales, how much time are you devoting to learning about the investment market? After work do you take some courses for fun? Or do you spend that time with your family and friends? An advisor is someone to have on your team that can free up your time to do other things instead of researching stocks, bonds, mutual funds or alternative investments. This is their 9 to 5. Now, the next question could be, how do I select the correct financial advisor? First we must learn the types of financial advisors and which one may be the most effective.

Financial Advisor Types

There are really only three types of advisors in the market now: Traditional Financial Advisors, Online Financial advisors and Robo Advisors. There are advantages and disadvantages to each.

Traditional Financial Advisors

A traditional financial advisor should be able to help you manage your money.

This is the most common advice offered. You may have seen this type of advisor on television talking about building the best retirement plan or offering a free consultation to help you build the best financial plan. This type of advice is usually a fee based advice and can be the most expensive of the options. Notice there, I said “fee”, not free. This is important when deciding on your advisor. That being said, you would receive face to face personalized advice. With this type of advisor, you can get all your questions answered by a live person and typically the same person. These individuals should have additional licenses such as brokerage licenses, asset management licenses and certified designations.

Traditional financial advisors should really only be used if you have a large amount of assets under management. Most firms require $250,000 dollars, some are less. Notwithstanding, these types of advisors should be consulted if you receive a large inheritance, planning for your estate, or looking to make complex investing decisions.

Online Advisors

Popularity for online advisors has increased substantially in many of the prior years. This is typically a hybrid between robo-advisors and traditional financial advisors. Given that, if this is a route to consider, you may be meeting with multiple individuals who are just starting to build their practice and you may be using more online tools. Personal research and decision-making will definitely play more of a role in this category.

An article that gives some options for online advisors as well as robo-advisors is ‘The Best Online Financial Advisors’. This would be an option for someone who would like to have some control over their own decisions, want access to a live person if they need questions answered. There could be a fee to this type of investing. It is however, usually a lesser fee than the traditional advisor.


If you are looking for a complete hands off option for investing where you don’t mind allowing computers to rebalance and don’t really have any interest in discussing options, perhaps a robo-advisor is the best option for you. Moreover, this is going to be the least expensive option of the three. Now, if you have a passion for making your own decisions, this might be an option for one part of your portfolio. You can always have another account where you actively invest with no guidance. I don’t want you to think this is a bad option by any means. This is just an option that doesn’t present any face to face commentary. Typically this option is guided by a risk assessment online and then offers options to invest on your own based on the assessment or allow a computer to automatically pick your investments.

Can a Robo-Advisor really be a good Financial Advisor?
Robo-Advisors are becoming more and popular.

In general, this is best for those who are just starting out, have little to invest, or don’t want to take the time to think about the investments. If you are in this category, I would still encourage you to pay close attention to the fees charged to allocate the investments and the fees charged within the investments. I have an article on ‘Mutual Funds‘ that I would encourage you to check out, as most of the investments with robo-advisors will be in mutual funds.

Bottom line on Financial Advisors

When selecting a financial advisor, understand that this person is going to see the ins and outs of your financial situation. There cannot be any question that this person is going to act in your best interest. Do not fall for the salesperson financial advisors. You should feel comfortable enough with this person to invite them to dinner on a Sunday evening. Also, you must make sure they understand your personal goals. They must be aligned to your personal goals and structure a plan that will help you achieve it. A financial advisor should offer options and education. Furthermore, I would be very leery of any advisor that starts suggesting investments. One of the major key points is that they should fully understand your interests and offer an array of investments that you can research and chose from.

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Personal Research

Even with a financial advisor, you should do your own research.

There must be an element of personal research and decision making on your part. If you don’t want to do any research or make any decisions, you leave your financial future in the hands of fate. You could always take some time to do research on investing. I just finished an interesting book on investing that I would recommend highly. ‘The 3 Percent Signal‘ by Jason Kelly. In my opinion, this is great investing strategy.

This is your money, your future, make sure you take an active role in it. You aren’t going to know everything, but it is important to ask questions and get all the answers you can before making any decisions. Think of a Financial advisor as an Investment Doctor. When you go to the doctor, they check your physical health. A financial advisor should be able to check your financial health. Make sure to ask as many questions about your investments as possible if you go with an advisor.

My Take On Financial Advisors

I must admit, early on in my career, I had a strong interest in becoming a financial advisor. I have a passion for investing and passed several tests towards that goal. However, it takes more than just a passion for investments to be a successful advisor. Good financial advisors are out there and if you decide on one, make sure to do your due diligence. Confirm they are licensed and which licenses they have. It would be better if they had some of the designations mentioned in this article.

Check Their Credentials

If you decide on getting financial advice, whether a financial advisor or financial planner, make sure to check the credentials they hold. I mentioned this earlier, but it’s important. A financial planner may hold a certified financial planning (CFP) designation and a financial advisor may hold a chartered financial analyst (CFA) or a chartered financial consultant (ChFC) designation. Each of these designations suggest that the advisor obtained some additional knowledge in the field and may be a better decision than those who do not have additional designations.

So, is a financial advisor right for you? I cannot answer that. But I hope I gave you enough information to make your own decision. Financial advisors are there to help. If you select one, make sure they are aligned to your goals. Last thing to remember is that investing is a very fluid concept. The market can change very quickly. The advisor should act in your best interest and always have a risk management strategy that makes sense. Do not let someone sell something to you that is inappropriate. I hope this article gave you a little more information on financial advisors and how they can help.

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