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A financial adviser can help you navigate the sometimes-treacherous waters of money management and provide support on the journey toward your financial goals.
But there are many types of financial professionals out there. “Financial adviser” is actually a general term that is often used to describe anyone in the business of helping others with their finances. A financial adviser might help with anything from general financial planning to investment management to tax and retirement strategy, and it can depend on their specialty.
Financial advisers may or may not have a variety of credentials, education backgrounds, professional experience and costs associated with their services. So before choosing a financial adviser, it’s a good idea to do some research to learn more about the different professionals available and decide which kind of financial adviser might be a good choice for you.
What is a financial adviser?
A financial adviser can act as a financial coach, helping you understand when to make certain financial decisions. In some cases, financial advisers can handle the logistics of carrying out those decisions as well. Some are skilled at analyzing what’s happening in the financial markets and how it can impact your financial situation. And certain financial advisers may have more expertise in one area than another.
Anne Mank, CFP, CPA, wealth adviser at Ellenbecker Investment Group, puts it this way: “Some advisers will just give a specific investment recommendation like ‘You should buy stock 123,’ and some will complete an entire financial plan, including estate recommendations, insurance planning and tax strategies, as well as investment portfolio suggestions.”
Two specific types of financial advisers that you may come across are financial planners and investment advisers.
Financial planners can vary widely. Some tend to focus on giving their clients a more-comprehensive perspective and help with their finances. Some financial planners will create a personalized financial plan to help a client with everything from budgeting to estate planning to figuring out what to invest in. But services may vary widely from one financial planner to another; some may only be able to offer a limited number of products and services.
Some financial planners have a certified financial planner certification, which requires extensive coursework through a board-registered program, a bachelor’s degree or higher from an accredited college or university, and passing the CFP® certification exam. If you’re considering hiring a CFP, you can check the Certified Financial Planner Board Standards to verify their certification status.
The ABCs of financial adviser credentials
There are dozens and dozens of different designations or certifications that financial advisers have — but not all are created equal. For example, while the education requirements for a CFP include a bachelor’s degree, an accredited financial counselor (or AFC®) certification requires two self-study courses — no college education required. The Financial Industry Regulatory Authority keeps a list of accredited designations — plus a tool you can use to look up and compare the many professional designations that financial advisers can have.
This more-specialized type of financial professional provides investment advice to others on the value of securities and on investing in or selling securities. Investment advisers can be individual people or firms. Their focus is on analyzing the value of stocks, bonds, exchange-traded funds and more. Investment advisers often recommend what and when their clients should buy, sell or hold depending on market conditions and the client’s goals.
Some individual investment advisers may have a CFP or chartered financial analyst (or CFA) designation. But keep in mind that an investment adviser may be a better option to help you with investing rather than financial planning.
Signs you might need a financial adviser
Over your lifetime, your financial plan and goals can evolve. Everything from making a career change to inheriting funds from a family member can have an impact on your financial life. When a big change happens, it can help to have someone by your side helping you make financial decisions.
Here are just a few reasons it might be time to think about looking into a financial adviser.
You’re just starting out
If your whole future is ahead of you and you’re just beginning to think about finances, an financial adviser might be able to help you avoid newbie pitfalls and mistakes. Buying your first home, opening a retirement account or planning for your first child can be good times to get some knowledgeable perspective on the road ahead.
You’re getting married
How you deal with touchy money issues can make or break the strong financial future you’re trying to build with your spouse. Just married? Check out our guide to finances for newlyweds to get you started.
You’re entering midlife
This is when planning and paying for your children’s college can loom large, along with figuring out savings strategies for retirement.
Retirement is on the horizon
Many people have no idea if they’ll be able to retire or how much money they’ll need in order to stop working one day. A financial adviser can help you make a plan to prepare for your financial future.
You want to stay retired
So you’ve managed to retire. Will you be able to live comfortably the rest of your life? Checking in with a financial adviser may help keep you on track.
There are plenty of “what-ifs” when it comes to financial planning. No matter what stage of life you’re at, some support and guidance may help you get (or stay) on track financially.
Human financial advisers vs. robo-advisers: What’s the difference?
You have a lot of options when it comes to selecting a financial adviser. One of them is whether to choose a human adviser or a robo-adviser.
Human financial advisers
A big benefit of human financial advisers is, of course, the human touch. They can provide more individualized hands-on planning and support to help you reach your financial goals. Human advisers may be able to better deal with complex financial situations and keep you accountable to your financial plans by giving you more-customized tools and pep talks. Because of this more hands-on level of service, they tend to be more expensive than robo-advisers.
Robo-advisers are nonhuman advisers that use information you provide to provide automated investment advice. They tend to be less expensive than human advisers and they typically have lower fees too. However, they may not be able to handle complex or highly personalized financial situations, and may be better suited for investment activities. Robo-advisers also can’t talk you through a situation or comfort you if you’re stressed, which a human adviser may be able to.
Partnering with a financial adviser could give you the guidance you need to help you achieve your short- and long-term financial goals, and may strengthen your overall financial well-being.
However, not all professionals are the same. You need to do your homework before deciding on which professional to work with. It’s important to compare your options to find the right financial adviser for your needs.