Financial planning is crucial to meet daily expenses, maintain a standard of living, and fulfill future goals. But many things are involved in financial management, making it challenging. As a result, people look for expert advice. If you, too, are considering hiring a financial advisor and it is your first time, you have come to the right place. This post highlights the basic queries you may have about the role of a financial advisor.

Who is a financial advisor?
Simply put, a financial advisor is a professional who offers financial services like income tax preparation, estate planning, and investment management. Not all advisors may be capable of providing all these services, but they still can guide you to manage and grow your savings smartly.

What are the primary duties of a financial advisor?
Their job is to increase your savings and deliver positive growth patterns over a while. To achieve this goal, financial experts strategize plans and diversify your money in the safest yet most profitable avenues. Depending on market trends, they may advise if you should invest in stocks, real estate, or other options. They may also answer any basic query about accounting and financial planning at any given point.

Are there different types of financial advisors?
No federal law defines a financial advisor, so it can be hard to categorize them. However, those bound by fiduciary duty are legally required to work in their client’s best interest. Based on this point, we can say that there are two kinds of advisors:

Fee-only advisor
Most fee-only advisors are fiduciaries who charge a fee for their services, either a flat fee or an hourly rate. Sometimes, it is a cut from the profits they help their clients earn. Since these experts make money serving their clients, they always have their best interests at heart.

Commission-based advisor
These advisors usually take a commission from third parties and may promote themselves as free financial advisors. However, some may take part payment from third parties and the rest from their clients. They usually sell investment plans and insurance policies. The more plans they sell, the more they earn.

What are the qualifications to become an advisor?
Besides being bound by fiduciary duty, professionals with appropriate educational backgrounds are suited for this designation. Banks and investment companies prefer professionals with a bachelor’s degree in finance, a major in finance, or specializations in economics and statistics.

Is there any way to verify a financial advisor?
Yes. Always hire someone with a practicing license. A Certified Financial Planner (CFP) is a certification that proves the individual has completed a course in financial management that may include topics like taxes, equities, and retirement planning. A Chartered Financial Consultant (ChFC) is certified by an institute of the country. A Registered Investment Advisor (RIA) is registered with the Securities and Exchange Commission. Ensure they have one or more of these qualifications. Also, there are ways to differentiate a good advisor from one that does not have your best interest at heart. To identify the right individual, analyze their client history, performance, and reviews.

What factors to assess before reaching out to a financial advisor?
Before hiring someone, assess your finances and set future goals. If possible, write down these realistic short- and long-term goals. It will help the advisor understand your requirement and plan accordingly. Also, make a list of all the questions you have. It could be regarding property taxes, college fees, vacation financing, and retirement planning.

Where to find a financial advisor?
If you have someone in your social circle and trust them to keep your financial situation confidential, there could not be a better bet. However, it could pose a long-term risk as you may share the same friends and colleagues. So, you can reach out to a trusted bank or investment company to set you up with a professional.

There are many advisors available online too. You can use websites like Boomerater, the National Association of Personal Financial Advisors (NAPFA), and Garrett Planning Network to connect with an expert. Online advisors can be categorized into:

Digital advisors
These are robot advisors that can help you choose the right investment portfolio using different algorithms. You will need to provide a clear financial goal and the degree of risk you are willing to take to maximize savings. It is a sought-after method to lower tax bills.

Hybrid advisors
These are a combination of robo advisors and human experts. While robo advisors handle most tasks, you may seek a human expert for help with a query or discussion. This works when you want to minimize human contact.