What does a financial advisor do?

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If you need advice to manage your finances, then you can take the help of a financial advisor, who is an expert on matters related to finance.Your advisor can help you plan and manage finances. You may have come across the terms ‘financial planner’ and ‘financial advisor’ that are used interchangeably. The key difference is that financial advisors advise clients on various aspects of their finances including investments, estate planning, debt management, etc. while a financial planner is usually more concerned about creating a plan to help you achieve your financial goals.

If you want professional help in managing your finances, so that you systematically plan the way you spend, save, and invest money; then you consult a financial advisor. While selecting an advisor, keep the following points in mind

  • Experience: Your advisor should be well experienced and have a proven track record of helping other clients manage their finances.
  • Qualifications: Look for an advisor that holds a degree in finance or is certified as a financial advisor.
  • Services offered: Look for an advisor that offers a broad range of services that are not restricted to only investments.Investment advice can be one included in the services offered. An investment advisor provides advice on investing money, whereas you are wanting a financial advisor to help managing your finances.

What does a Financial advisor do?

A financial advisor provides a wide range of services.

  • One of the first things they will look at is your overall finances, so that they can advise you on how to save money and reduce unnecessary expenses.
  • Assist in planning your financial goals.An advisor will try to understand your needs, from the short, medium, and long-term perspectives. Based on this, they will advise you on the financial goals that you can set. This includes short-term goals like planning for purchase of a car or house, planning for children’s education, as well as long-term goals like retirement planning.
  • The advisor will try to understand your tolerance for risk. This will help in offering investment solutions.You may be administered a questionnaire and based on your answers, your risk tolerance will be decided. Your risk tolerance may be classified as high, medium, or low.
  • Investment advice. This involves helping you decide how to invest the money that you have saved. You will be provided with information on the investment options that are available for you that meet your risk tolerance.
    • Stock market investments in stocks or mutual funds.
    • Debt investments (bonds, Govt. securities).
    • Retirement funds (IRA, 401k, Pension plan)
    • Physical assets like real estate, gold, and precious metals
  • Insurance is another area where you can obtain advice. The advisor will understand your needs and based on the same suggest the right insurance plan and the amount to be insured.
  • Once the financial goals are decided and the risk tolerance is determined, the next activity is to create a financial plan. You will be assisted in preparing a comprehensive plan that will include the following:
    • A plan to save money every month
    • Debt planning to clear all existing debts
    • Plan for taxes
    • Plan for saving money for insurance
    • An investment plan with details on different assets to invest in. This is decided based on risk tolerance and goals.
    • Method of investing – one time investment or systematic investment
  • Once the plan is created, you can even ask for help in actually going ahead with the investments. This includes help in opening an investment account and carrying out investment-related transactions.
  • Your financial advisor will review the financial plan with you periodically to find out if the plan created is achieving the goals set up and if your needs have changed. This includes reviewing the assets invested and their performance. Where required, corrections are suggested in your plan.

A financial advisor can provide a range of services to suit all your needs. In return for providing this advice, he may charge a fixed fee or charge an annual fee to provide advisory services every year.

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Online and Robo advisors

The process of getting financial advice has traditionally involved a meeting between the advisor and the client. Thanks to the growth of online service providers, the entire investment advisory process can be done online. You can now interact online with an advisor. This can help to save time and can reduce your expenses too. A popular advisory option nowadays is the use of Robo-advisors. A Robo-advisor is an Artificial Intelligence based software that can help you manage your finances. The advice is generated based on the inputs you provide. Since there is no human intervention, you will be charged a lesser fee. A robo-advisor will not have any bias in favor or against a financial product and will advise solutions strictly based on data.

Financial advice is very helpful if you want to manage your finances in a smooth and effective way. If you are looking to create wealth and save for the future, a financial advisor can help you do this.

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