What Is a Financial Advisor?

What Do Financial Advisors Do?

A financial advisor provides personalized advice based on your unique financial situation. They might offer guidance on:

• Budgeting and saving
• Paying down debt
• Investing
• Retirement planning
• Tax planning
• Estate planning

Some financial advisors have specific areas of expertise, such as financial planning for seniors or student loan repayment. When choosing a financial advisor, start by asking yourself what you're hoping to get from the experience. That can help guide you toward the right financial expert.

Types of Financial Advisors

The term "financial advisor" refers to any financial professional who offers advice around personal finances or money management. Below are three common types of financial advisors:

• Certified financial planner (CFP): CFPs offer comprehensive financial advice and have earned the CFP designation from the Certified Financial Planner Board of Standards. That requires fulfilling an education requirement, passing the CFP exam, gaining work experience and meeting an ethics requirement.
• Investment advisor: These financial advisors typically monitor their clients' investment accounts and make personalized recommendations. Some even buy and sell securities on their behalf. Investment advisors must pass an exam from the Financial Industry Regulatory Authority (FINRA) and register with the U.S. Securities & Exchange Commission (SEC).
• Chartered financial analyst (CFA): CFAs are financial advisors who specialize in advanced portfolio management and risk analysis. This allows them to offer personalized investment insights. They typically work for financial institutions or advise high-net-worth investors. The CFA charter is granted by the CFA Institute.

Learn more: CFA vs. CFP: What's the Difference?

How Much Does a Financial Advisor Cost?

Fees can vary from one financial advisor to the next, but many charge 1% to 2% of the total assets under management (AUM). According to a 2024 Kitces report, you might also see a mix of the following fee structures:

Do I Need a Financial Advisor?

Reviewing your financial situation and goals can help you decide if working with a financial advisor makes sense for you. It may be worth considering if:

• You're feeling financially stressed. A financial advisor can help with everything from debt repayment to saving for retirement. According to a recent Vanguard survey, 86% of advised investors say that receiving professional guidance has led to greater financial peace of mind.
• You want professional investment advice. Not everyone has the time or expertise to manage their own investment portfolio. A financial professional can take that task off your shoulders and help you maintain an asset allocation that's aligned with your goals and risk tolerance.
• You've experienced a major life event. Getting married or divorced, welcoming a baby or selling a business are all life events that could majorly disrupt your finances. The right financial advisor can help you navigate the transition. That might involve updating your estate plan.

Learn more: Financial Planners Weigh In: Tips for Getting Out of Debt

How to Find a Financial Advisor

After deciding which type of financial advisor you want to work with, you can follow these steps to get the ball rolling:

1. Seek information from trusted sources. You can ask around among friends and family and search the National Association of Personal Financial Advisors database. The CFP Board and CFA Institute have similar online tools.
2. Do your research. Be sure to read customer reviews and compare services and fee structures to weed out advisors who aren't the right fit. FINRA's BrokerCheck tool can tell you if an advisor is properly registered and allow you to see if they have a history of complaints or regulatory actions.
3. Reach out to potential advisors. Once you have a short list, you can contact advisors to get a feel for how they approach financial planning—and whether they have a fiduciary duty to their clients. If so, they'll be obligated to act in your best interests when making financial recommendations.

Learn more: Fiduciary vs. Financial Advisor: What's the Difference?

Frequently Asked Questions

The Bottom Line

A financial advisor can provide one-on-one guidance that's tailored to you. That can help strengthen your financial health and allow you to make progress toward your goals. It can also take some of the legwork out of managing your finances—instead of taking a DIY approach, you'll have a financial professional in your corner. Just be sure to go with a credentialed advisor who has a fee structure that makes sense for your budget.