What Do Financial Advisors Do

1. MAY WONDER WHAT A FINANCIAL ADVISOR DOES WHAT DO FINANCIAL ADVISORS DO? Professionals help you make decisions about what you should do with your money FINANCIAL ADVISOR IS OFTEN RESPONSIBLE FOR MORE THAN JUST EXECUTING TRADES IN THE MARKET ON BEHALF OF THEIR CLIENTS Advisors use their knowledge and expertise to construct personalized financial plans that aim to achieve the financial goals of clients.

2. The Many Roles of a Financial Advisor A Retirement Financial Planning Advicer is your financial planning partner. Let's say you want to retire in 20 years or send your child to a private university in 10 years. To accomplish your goals, you may need a skilled professional with the right licenses to help make these plans a reality; this is where a financial advisor comes in. Together, you and your advisor will cover many topics, including the amount of money you should save, the types of accounts you need, the kinds of insurance you should have, and estate and tax planning. The financial advisor is also an educator. Part of the advisor's task is to help you understand what is involved in meeting your future goals. The education process may include detailed help with financial topics. At the beginning of your relationship, those topics may include budgeting and saving. As you advance in your knowledge, the advisor will assist you in understanding complex investment, insurance, and tax matters.

3. The Financial Health Questionnaire A financial advisor will work with you to get a complete picture of your assets, liabilities, income, and expenses. On the questionnaire, you will also indicate future pensions and income sources, project retirement needs, and describe any long-term financial obligations. In short, you’ll list all current and expected investments, pensions, gifts, and sources of income. The investing component of the questionnaire touches upon more subjective topics, such as your risk tolerance and risk capacity. Having an understanding of your risk assists the advisor when it’s time to determine your investment asset allocation. At this point, you'll also let the advisor know your investment preferences as well. The initial assessment may also include an examination of other financial management topics, such as insurance issues and your tax situation. The advisor needs to be aware of your current estate plan, as well as other professionals on your planning team, such as accountants and lawyers. Once you and the advisor understand your present financial position and future projections, you’re ready to work together on a plan to meet your life and financial goals.

4. Creating The Financial Plan The financial advisor synthesizes all of this initial information into a comprehensive financial plan that will serve as a roadmap for your financial future. It begins with a summary of the key findings from your initial questionnaire and summarizes your current financial situation, including net worth, assets, liabilities, and liquid or working capital. The financial plan also recaps the goals you and the advisor discussed. The analysis section of this lengthy document will provide more information about several topics, including your risk tolerance, estate planning details, family situation, long-term care risk, and other pertinent present and future financial issues. Based upon your expected net worth and future income at retirement, the plan will create simulations of potentially best- and worst-case retirement scenarios, including the scary possibility of outliving your money. In this case, steps can be taken to prevent that outcome. It will look at reasonable withdrawal rates in retirement from your portfolio assets. Additionally, if you are married or in a long- term partnership, the plan will consider survivorship issues and financial scenarios for the surviving partner. After you review the plan with the advisor and adjust it as necessary, you’re ready for action.

5. Advisors Plan Action Steps A financial advisor is not just someone who helps with investments. Their job is to help you with every aspect of your financial life. You could work with a financial advisor without having them manage your portfolio or recommend any investments at all. For many people, however, investment advice is a major reason to work with a financial advisor. If you choose this route, here’s what to expect. The advisor will set up an asset allocation that fits both your risk tolerance and risk capacity. The asset allocation is simply a rubric to determine what percentage of your total financial portfolio will be distributed across various asset classes. A more risk-averse individual will have a greater concentration of government bonds, certificates of deposit, and money market holdings, while an individual who is more comfortable with risk may decide to take on more stocks, corporate bonds, and perhaps even investment real estate. Your asset allocation will be adjusted for your age and for how long you have before retirement. Each financial advisory firm is required to make investments by the law and with its company investment policy when buying and selling financial assets.

6. Signs You May Need an Advisor None of Your Savings Is Invested or You Don’t Know How to Invest Because we live in a world of inflation, any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow, and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire. You Have Investments, but You’re Consistently Losing Money Even the best investors lose money when the market is down or when they make a decision that doesn’t turn out as they’d hoped. But, overall, investing should increase your net worth considerably. If it’s not doing that, hiring a financial advisor can help you find out what you’re doing wrong and correct your course before it’s too late. You Don’t Have a Current Estate Plan A financial advisor can also help you put together an estate plan to make sure your assets are handled according to your wishes after you die. And if you aren’t properly insured, a financial advisor can help with that, too. Indeed, a fee-only financial advisor may be able to offer a less biased opinion than an insurance agent can.