What comes to mind when you think of hiring a financial advisor? Stress and anxiety or peace and confidence? And what does a financial advisor do anyway?
The best financial advisors don’t hide behind a desk playing games or checking social media. Maybe some “financial advisors” do that, but the best financial advisors add value to your financial planning far above their fees. The best financial advisors add that value with skill, competence, experience, execution, and personal attention.
The best financial advisors don’t sell products, they solve problems. They work on a fee-only compensation model so there are NO commissions to be made by selling you a product. This reduces or eliminates most conflicts of interest.
In fact, if a financial advisor talks about insurance or investment products right away, RUN!
Plus, investment or insurance products aren’t the only tools to solve a problem, and unless that financial advisor truly understands your problems, they’ll never be able to solve them.
The best financial advisors get you from point A to point B while maximizing every dime you have and inspiring “money confidence.”
1. Financial advisors listen to their clients
First and foremost, the best financial advisors listen to their clients. Only after listening can they assess your money issues, financial worries, needs and goals for the future.
Since the best financial advisors aren’t focused on selling you insurance or investment products, their only motivation is helping you get from where you are now to where you want to be with your money!
It should be a “win-win” situation! Your financial advisor should add tremendous value to your planning by solving your problems and helping you maximize your finances.
This requires the advisor to truly listen and understand their clients’ current and future problems, anxieties, and goals.
There is a real human element to the profession that must come to the surface in order for an advisor-client relationship to thrive.
You’re unique! You have specific things that worry you or make you happy. There really isn’t a “one-size-fits-all” financial or retirement planning solution!
This makes “listening” the most important thing on this list. The best financial advisors will listen first and foremost!
Only after intently listening to a client can a great financial advisor begin to formulate an individualized plan. A plan that’s holistic and helps make your financial dreams a reality.
PRO TIP: If your financial advisor is more interested in telling you how their investment or insurance solutions will solve your problems rather than listening to your financial worries, goals, and needs for the future . . . GET ANOTHER FINANCIAL ADVISOR!
2. Financial advisors gather information and perform background analysis
After learning about a client’s concerns and goals, financial advisors must review relevant financial data in order to establish a starting point, find room for improvement, and make a plan.
This analysis involves reviewing documents such as:
- Tax returns
- Estate documents and insurance policies
- Investment account statements
- Income and expenses
- Assets and liabilities
Wow, that’s a lot of personal information!
And it’s so important that you trust your financial advisor. The best advisors know this! That’s why they work to earn—and keep—your trust throughout the relationship.
Remember, the relationship you have with your financial advisor will be second only to the immediate family. I mention this because it’s truly how I feel!
It’s hard for me to say that there are more important relationships outside of family. But the financial advisor-client relationship is so unique!
You are after all opening up your financial books, your life story, your passions and goals for the future.
Who else do you trust with that aside from maybe family? (and your closest friends) . . .
Your financial advisor has to consider your current circumstances as well as your goals plus other factors that will influence financial and retirement planning. Those things like your age, financial health, physical health, life goals, and employment status play a huge part in their financial advice.
3. Financial advisors implement your financial plan
Once your financial advisor has a clear picture of your financial and retirement needs and goals, and where there is potential for improvement and growth, a plan can be implemented provided the client is on board.
You can lead a horse to water but you can’t make him drink.An old proverb
The best financial advisors develop a plan to improve any issues and make the most of their client’s money.
They accomplish financial goals through:
- Tax planning & minimization
- Estate planning guidance
- Investment planning and ongoing management
- Risk management/insurance planning
- Behavioral support, coaching, and guidance
These are the big-ticket items that are going to help you grow and protect your assets. A rock-solid financial plan includes so much more than just investments!
The best advisors make a plan that includes protections (like insurance) and risk management. A plan that encompasses tax minimization and income planning, and so much more!
In short, the advisor’s goal should be to maximize and refine every aspect of your financial and retirement plan.
4. Financial advisors guide and hold their clients accountable
A bullet-proof financial or retirement plan is great on paper, but if the plan isn’t executed, monitored, and maintained, it won’t be of much use at all. The best-laid plans of financial or retirement planning are worthless at best . . . and financially destructive at worst.
The best financial advisors educate and guide their clients. This way, the client understands the reason for each decision and how veering off-path will affect them.
The best financial advisors will make sure their clients follow through! Save that extra 5% into your 401(k), pay down that mortgage, do that Roth conversion!
Your advisor must keep you accountable while guiding you on the path for financial success!
Financial advice, guidance, and most importantly accountability are key factors in what a great financial advisor does.
5. Financial advisors are also counselors
Financial and retirement planning can be an emotional process. Your hard-earned money—as well as your hopes and dreams—are at stake after all.
Add in the money and life-goal differences you and your spouse may have and it can be challenging!
You have money goals and life aspirations. You likely want to travel, make large purchases (like a home, a boat, or a vacation), and retire comfortably.
Or maybe you dream of fishing with the grandkids or golfing with your friends. Regardless, you have a picture in mind of what life you ultimately dream of.
There are going to be situations that can cause emotions to run high! For example, a large drop in the market that negatively affects your portfolio. Maybe a tax law change where you’d need to trim your spending?
Maybe politics or conflicts in the middle east . . . It’s endless!
Inevitably, you’ll wonder if your plan is working, or if it is slowly being derailed putting all of your dreams in jeopardy.
The best financial advisors understand that events like a market correction are going to make their clients emotional and scared. In those moments, financial advisors prevent their clients from making irrational decisions based on emotion, such as selling their stock in a bad market.
The best financial advisors are able to understand their client’s emotions, educate them, counsel them, and have already prepared for the next steps.
6. Financial advisors foster relationships
Not only is it important for financial advisors to form a trusting relationship with their clients, but they also have to form business relationships with other professionals.
Advisors may need to collaborate or consult experts in the tax, insurance, or legal branches.
They may call on these professionals to review part of your personal financial plan or to help with aspects of establishing and refining an estate plan or a trust.
The best financial advisors know the importance of professional and trustworthy relationships, and they put the power of these relationships to work for you.
Need a living trust? Need your taxes done?
Most financial advisors are quarterbacks. They know when they need to bring in the other experts.
The best financial advisors know when and how to engage the right people when they need to do so. Ideally, they’ve already forged these relationships with other professionals they’ve thoroughly vetted.
7. Financial planning is a marathon, not a sprint
A financial advisor’s job and obligation to a client doesn’t end when the financial planning meeting finishes. Advisors must regularly monitor, reevaluate, and manage the planning and investment process.
The best financial advisors will schedule periodic visits so that they can talk with their clients and revisit the plan.
This is proactive planning, kind of like a wellness check with your doctor (by the way, have you been keeping up with your annual medical check-ups? Maintaining your health is also key to protecting your finances).
Wellness checks allow your health care team to check up on you, make sure you are still healthy, ask if anything has changed, if you have worries, and serves to spot any concerns early before something becomes a major problem. Financial advisors are the doctors of your current and future financial wellbeing.
Financial advisors spend a good amount of time analyzing the market and evaluating client portfolios. This is where financial advisors draw on their wealth of education and experience (and why it is so important to find the best financial advisor).
8. Financial advisor education
Education is a cornerstone of any financial advisor’s success, and the best advisors are always honing their skills in the art of financial planning and professional development. The advisor’s clients will surely hold high expectations of any advisor they hire.
As a basic foundation, the best advisors are Certified Financial Planners (CFPs). The CFP® certification is only granted to those who have a bachelor’s degree, have completed thousands of hours of applicable financial experience (such as through an internship, as a volunteer, or a job), and of course have passed the comprehensive, 6-hour CFP® exam after roughly 2 years of study
This is really just the starting point in terms of education. Financial advisors then seek additional certifications in other areas of interest, including:
CPA – Certified Public Accountants help individuals and companies with financial planning, investments, and taxes
CFA – Certified Financial Analysts have extensive knowledge in accounting, economics, asset management, and security analysis
ChFC – Chartered Financial Consultants have experience and knowledge in financial planning, including income tax, insurance, investment, and estate planning
CLU – A Chartered Life Underwriter helps people understand life and health insurance, pension planning, insurance law, income taxation, investments, financial and estate planning, as well as group benefits
AIF – An Accredited Investment Fiduciary is an expert in the area of investment management with a special emphasis on practicing as a true fiduciary.
Financial education is continuous
The financial world changes often and quickly. Financial advisors must keep up with the fast-paced changes to issues such as:
- Tax & estate law
- Investment regulations
- Insurance regulations
- The economic status of the nation and the world
In order to keep up with so many changes, financial advisors participate in formal continuing education as well as independent study.
The CFP® board requires 30 hours of continuing education every two years to retain CFP® certification and the Financial Industry Regulatory Authority (FINRA) also requires Series 6 and 7 license continuing education.
This is just the tip of the iceberg. Any additional certifications also come with their own set of continuing education requirements.
The best financial advisors independently study as well. They pay attention to key events happening in the world, read books and journals related to their expertise, and attend conferences. For example, I attend 3-4 professional conferences per year to stay at the peak of my game!
It may be a new SEC regulation or a modification to law by Congress (for example, the recent Secure Act changes for inherited IRA rules). Regardless, the best financial advisors know that they need to stay current on these topics so they can continue to maximize your planning.
After all, a single law change could have a huge impact on your financial future.
So, what does a financial advisor do?
Financial advisors do a lot:
- Listen to people and understand their problems and concerns
- Use financial planning processes to help people
- Formulate plans to grow & protect clients’ wealth
- Use risk management to protect clients
- Continuously monitor their clients’ plan and progress
- Educate themselves to best serve their clients
- Guide, educate, counsel, and direct clients throughout the years
- Help keep you grounded in poor market conditions
- Solve your financially-related problems
As you can see, financial advisors play a crucial role in the well-being of their clients. Clients place an enormous amount of trust in their advisors, hiring them to take care of their finances, which are ultimately used to take care of the family.
Now the question is…
What can a financial advisor do for you?
Do you have concerns about your current financial state? Are you worried you’ll die broke? Are you afraid you won’t realize the retirement you’ve always dreamed of?
These are normal feelings and I am here to help. Contact me today so that we can make the best retirement plan for you!
Frequently Asked Questions on what a financial advisor does
There are many types of “financial advisors”, but the best financial advisors will listen intently to your unique financial needs and goals for the future, gather your financial information, develop a comprehensive financial or retirement plan, help you execute on that plan and hold you accountable, maintain professional relationships in areas they don’t have expertise and continue to grow and stay informed in their profession to better assist you in your future financial endeavors.