Financial Advisors

Financial advisors work with clients to develop a comprehensive financial plan that includes budget, insurance, savings and tax strategies that align with clients’ financial goals. Financial advisors may also monitor investments and assist with estate planning. The best financial advisors are licensed and certified.

Jennifer Schell headshot
  • Written By
    Jennifer Schell

    Jennifer Schell

    Financial Writer

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

    Read More
  • Edited By
    Savannah Pittle
    Savannah Pittle, senior financial editor for Annuity.org

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

    Read More
  • Financially Reviewed By
    Thomas J. Brock, CFA®, CPA
    headshot of Thomas J. Brock, CFA, CPA

    Thomas J. Brock, CFA®, CPA

    Investment, Corporate Finance and Accounting Expert

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

    Read More
  • Updated: August 14, 2023
  • 10 min read time
  • This page features 8 Cited Research Articles
Fact Checked
Fact Checked

Annuity.org partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

Cite Us
How to Cite Annuity.org's Article

APA Schell, J. (2023, August 14). Financial Advisors. Annuity.org. Retrieved June 20, 2024, from https://dev.annuity.org/financial-advisors/

MLA Schell, Jennifer. "Financial Advisors." Annuity.org, 14 Aug 2023, https://dev.annuity.org/financial-advisors/.

Chicago Schell, Jennifer. "Financial Advisors." Annuity.org. Last modified August 14, 2023. https://dev.annuity.org/financial-advisors/.

Why Trust Annuity.org
Why You Can Trust Annuity.org
Content created by Annuity.org and sponsored by our affiliates.

Annuity.org has been providing consumers with the tools and knowledge needed to confidently make financial decisions since 2013.

We accept limited advertising on our site to help fund our work, including the use of affiliate links. We may earn a commission when you click on the links at no additional cost to you.

The content and tools created by Annuity.org adhere to strict editorial guidelines to ensure quality and transparency.

Key Takeaways

  • Financial advisors offer services related to investment management, portfolio monitoring, retirement, estate and tax planning.
  • A financial advisor might have an official designation of Certified Financial Planner™ professional, Chartered Financial Analyst or Personal Financial Specialist.
  • When choosing a financial advisor, consider their qualifications and whether they have experience with the types of services you require.

What Is a Financial Advisor?

A financial advisor is a professional who offers individuals advice on how to manage their personal finances. The services a financial advisor provides can include researching investment opportunities, informing clients about specific investments that might meet their needs, monitoring clients’ financial accounts and recommending changes if needed.

As an initial step, financial advisors prioritize offering a financial needs analysis, which serves as a fundamental component of a comprehensive financial plan. This analysis takes precedence during initial consultations with new clients or when assessing the financial situation of existing clients.

Most financial advisors work regular full-time hours during the work week. Many advisors are employed by firms, but about 19% of financial advisors are self-employed, according to data from the Bureau of Labor Statistics.

In terms of qualifications, financial advisors typically have at least a bachelor’s degree in a related subject like business, finance or mathematics. Additionally, financial advisors can obtain certifications to enhance their reputation.

There are a lot of excellent financial advisors in the market, but there are also some unscrupulous ones. Finding one that is experienced and credentialed is very important. However, it’s also important to consider the demeanor of a financial advisor. The most effective advisors are patient, empathetic and inclined to educate their clients.

How Is a Financial Advisor Different From an Accountant?

Financial advisors and accountants are both professionals that can help you manage your finances. However, there are some key differences between a financial advisor and an accountant that you should know.

Accountants are more focused on tax planning and preparation, while financial advisors take a holistic look at a client’s financial situation and help them plan for long-term financial goals such as retirement. In other words, accountants deal with the past and present of a client’s finances, and financial advisors are focused on the client’s financial future.

Another difference between financial advisors and accountants is how they interact with their clients. Accountants tend to be hired on a short-term basis and can be thought of as contractors, whereas financial advisors are more likely to develop a long-term professional relationship with their clients.

Finally, accountants and financial advisors differ in their approach to financial topics. Accountants tend to specialize in a certain area, while financial advisors are often generalists when it comes to their financial expertise.

How Is a Financial Advisor Different From a Financial Planner?

The terms “financial advisor” and “financial planner” are sometimes used synonymously to describe finance professionals, said Stephen Kates, an Annuity.org contributor and Head of Financial Planning at Advisor.com. However, there are some subtle differences between the two professions.

A financial advisor’s focus is on investment management. They might help their clients choose which assets to invest in, monitor those investments and recommend changes in strategy. The advisor might even have permission from their client to buy and sell stocks and bonds on the client’s behalf.

In contrast, financial planners adopt a wider scope in the advice they offer to their clients. “Financial planners use their expertise in taxes, budgeting, pensions and assets to develop a comprehensive plan for your finances,” said Bruce Mohr, a senior investment advisor and credit consultant at FairCredit.

Let’s Talk About Your Financial Goals.

Take our free 3-minute quiz to match with a financial advisor instantly. Recommendations tailored to your goals.

What Do Financial Advisors Do?

The services financial advisors provide to their clients span from reviewing investments and managing portfolios to tax planning, estate planning and more.

For many clients, the main reason to hire a financial advisor is to build and manage their investment portfolio. Advisors help their clients craft a portfolio that balances minimal risk and efficient growth. Your advisor can keep you informed on how much return you can expect from your investments and help you react to market volatility.

In addition to asset management, financial advisors sometimes help their clients plan for different financial goals. For many people, their investment portfolio is their retirement fund, so retirement planning goes hand in hand with managing their investments. A financial advisor can also help you decide how best to achieve goals like saving for your child’s college education or paying off your debt.

Although financial advisors are not as well-versed in tax law as an accountant might be, they can offer some guidance in the tax planning process. An advisor can help you predict the tax liability of your investment strategies and might advise you on how to lower that liability while remaining compliant with regulations.

Some financial advisors offer estate planning services to their clients. They might be trained in estate planning, or they may want to work with your estate attorney to answer questions about life insurance, trusts and what should be done with your investments after you die.

Finally, it’s important for financial advisors to stay up to date with the market, economic conditions and advisory best practices. To do so, advisors are constantly sharpening their skills and broadening their expertise by reading and watching news publications, continuing their education, attending industry conferences and earning professional designations.

What Credentials Do Financial Advisors Need?

Although there are no specific credentials or training required for someone to call themselves a “financial advisor,” most professional advisors have some sort of relevant license or certification.

According to the U.S. Securities and Exchange Commission (SEC), an “investment advisor” is any person or firm that “engages in the business of providing investment advice to others about the value of or about investing in securities” for compensation. Investment advisors are required to register with the SEC or state securities authorities.

To sell investment products, advisors must pass the relevant Financial Industry Regulatory Authority-administered exams — such as the SIE or Series 6 exams — to obtain their certification.

Advisors who wish to sell annuities or other insurance products must have a state insurance license in the state in which they plan to sell them.The most common credentials that financial advisors earn are Certified Financial Planner™ (CFP® professional), Chartered Financial Analyst (CFA) and Personal Financial Specialist (PFS). Each of these designations requires the advisor to pass an examination to demonstrate their expertise.

How Do Financial Advisors Make Money?

Financial advisors may be paid an annual salary plus commission, or they may charge a fee equal to a percentage of the assets under management (AUM). In some cases, advisors charge a fee plus a commission.

The three financial advisor compensation models:

  • Fee-based
  • Fee-only
  • Commission-based

Fiduciaries are generally fee-only advisors because they are obligated to act in the best interest of the client at all times. Commissions would present a conflict of interest for a fiduciary because such incentives are based on selling specific products, as opposed to growing a client’s portfolio.

>> Read More: Our Top 4 Picks for Best Fiduciary Financial Advisors of 2023

What Do Financial Advisors Charge in Fees?

As previously stated, financial advisors charge fees based on the value of the assets they’re managing. A typical percentage a financial advisor might use ranges from 0.25% to 1% per year.

For example, let’s say you have $5 million in assets to manage. You hire an advisor who charges you 0.50% of AUM per year to work for you. This means that the advisor will receive $25,000 a year in fees for managing your investments.

Because of the typical fee structure, many advisors will not work with clients who have under $1 million in assets to be managed. The fees an advisor would receive for those smaller accounts just aren’t worth the time it takes to manage a portfolio properly.

Investors with smaller portfolios might seek out a financial advisor who charges an hourly fee instead of a percentage of AUM. Hourly fees for advisors typically run between $200 and $400 an hour. The more complex your financial situation is, the more time your advisor will have to devote to managing your assets, making it more expensive.

Who Is a Financial Advisor Right For?

If you want to achieve financial goals like retiring early, leaving behind an inheritance or getting out of debt, you may find working with a financial advisor beneficial. Advisors are skilled professionals who can help you develop a plan for financial success and implement it.

You might also consider reaching out to an advisor if your personal financial circumstances have recently become more complicated. This could mean buying a house, getting married, having children or receiving a large inheritance. Having an advisor’s guidance can help you think strategically about your finances and choose the path that’s right for you.

Another situation that might require the guidance of a financial advisor is starting your own business. “Business owners may benefit from a financial advisor’s expertise in areas such as tax planning, business strategy and growth,” said Matt Welsh, a CFP® professional with Materetsky Financial Group. Financial advisors can help small-business owners make the most of their money by integrating business and personal finances.

Let’s Talk About Your Financial Goals.

Take our free 3-minute quiz to match with a financial advisor instantly. Recommendations tailored to your goals.

How Do I Find the Financial Advisor That’s Right for Me?

Choosing a financial advisor is a big decision and is not something to be taken lightly. To find the financial advisor that’s right for you, Welsh recommends considering their qualifications, expertise and experience.

Your advisor should hold a designation from an industry organization, such as the CFP® Board or the CFA Institute. You may want to research the advisor online to find out if they’ve had complaints filed against them or poor reviews from past clients.

Before you meet with the advisor for an initial consultation, consider what services are most important to you. Older adults may need help with retirement planning, while younger adults may be looking for the best way to invest an inheritance or starting a business. You’ll want to seek out an advisor who has experience with the services you want.

Besides asking about their experience, here are some other questions to ask an advisor before you start working with them.

Questions To Ask a Financial Advisor

  • How long have you been advising?
  • What business were you in before you got into financial advising?
  • Who makes up your typical client base?
  • Can you provide me with names of some of your clients so I can discuss your services with them?
  • Will I be working with you directly or with an associate advisor?

You may also want to look at some sample financial plans from the advisor. Ask if you can see multiple samples and compare them. If all the samples you’re provided are the same or similar, it may be an indication that this advisor does not properly customize their advice for each client.

Types of Financial Advisors

There are three main types of financial advising professionals: Certified Financial Planner™ professionals, Chartered Financial Analysts and Personal Financial Specialists.

Certified Financial Planner™

The Certified Financial Planner™ professional (CFP® professional) certification indicates that an advisor has met a professional and ethical standard set by the CFP® Board. According to the CFP® Board of Standards, these professionals have “completed extensive training and experience requirements and are held to rigorous ethical standards.”

Financial advisors pursuing this designation must pass the CFP® Certification Exam. The exam covers financial topics including financial planning, tax planning, retirement and estate planning and investment management and insurance.

In addition, applicants must have at least three years of experience with the financial planning process to qualify for the CFP® professional designation.

Chartered Financial Analyst

Chartered financial analysts, or CFAs, have several career paths within various investment management sectors. CFA charterholders can provide clients with services such as wealth and asset management, commercial and investment banking and insurance.

Personal Financial Specialist

The personal financial specialist professional designation is offered and recognized by The American Institute of Certified Public Accountants (AICPA).

To qualify for the PFS designation, advisors must hold a valid CPA license and be a current member of the AICPA. The advisor must have earned a minimum of 75 hours of continuing professional development and completed 3,000 hours of business or teaching experience within the five years prior to applying for the PFS designation.

Advisors must also pass the PFS Exam unless they have passed the CFP® or Chartered Financial Consultant (ChFC) exam — in which case, AICPA considers the advisor to have met the exam requirement.

Frequently Asked Questions About Financial Advisors

How do you choose a financial advisor?

When choosing a financial advisor, consider someone with a professional credential like a CFP® or CFA. You might also consider an advisor who has experience in the services that are most important to you.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 14, 2023

8 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Pinkerton, J. (2022, November 21). What Does a Financial Advisor Do? Retrieved from https://money.usnews.com/financial-advisors/articles/what-does-a-financial-advisor-do
  2. U.S. Securities and Exchange Commission. (2022, October 9). Investment Advisor. Retrieved from https://www.investor.gov/introduction-investing/investing-basics/glossary/investment-adviser
  3. U.S. Bureau of Labor Statistics. (2022, September 8). Personal Financial Advisors. Retrieved from https://www.bls.gov/ooh/business-and-financial/personal-financial-advisors.htm
  4. Kavanagh, R. & Loudenback, T. (2022, July 13). Understanding What Financial Advisors Do and How They Help Clients Better Manage Their Money. Retrieved from https://www.businessinsider.com/personal-finance/what-does-a-financial-advisor-do
  5. Gross, E. L. (2022, July 8). When Do You Need a Financial Advisor? Experts Explain. Retrieved from https://www.marieclaire.com/career-advice/when-you-need-financial-advisor/
  6. Waggoner, J. (2022, April 22). Can You Afford a Financial Planner? Retrieved from https://www.aarp.org/money/investing/info-2022/financial-planner-costs.html
  7. Connecticut Department of Banking. (n.d.). Choosing a Financial Planner. Retrieved from https://portal.ct.gov/DOB/Consumer/Consumer-Education/Choosing-A-Financial-Planner
  8. Maryville University. (n.d.). Financial Planner vs. Financial Advisor: What’s the Difference? Retrieved from https://online.maryville.edu/online-masters-degrees/accounting/careers/financial-planner-vs-advisor/