What do financial advisors do?

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“There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich,” Charles Kindleberger, an American economic historian, said it best. To put it another way, we want to get rich before our peers.

The problem is that only 27% of Indian adults are financially literate, according to reports. They might be able to make a fortune sooner or later, but what about the rest of us? What will happen to our desire to pile up wealth, own a house, maybe a car, travel the world, and so on?

Financial advisors come to the rescue! In this article, we shall take a look at who are financial advisors, what do financial advisors do, how to find the right financial advisor, and more. Keep reading to find out.

Who are financial advisors?

If you are an average Joe who needs help with finances, a financial advisor is someone you need to go to. A financial advisor helps folks like you and me get our personal finances on track and set long-term objectives. 

Financial advisors are professionals who offer their clients financial advice in exchange for remuneration. They use their expertise and knowledge to develop customized financial plans for clients, right from creating an emergency fund to retirement planning and everything in between.

What do financial advisors do?

Financial advisors provide a spectrum of services to help clients manage their finances and achieve their financial goals. Here are some of the services provided by financial advisors:

  1. Financial Planning:

Financial advisors assist clients in building a comprehensive financial plan that includes budgeting, saving, investing, and risk management.

  1. Investment Management: 

By offering guidance on asset allocation, diversification, and risk management, financial advisors help their clients manage their investments.

  1. Retirement Planning

Financial advisors calculate retirement expenses, identify sources of retirement income, and develop a strategy for their clients to save for retirement.

  1. Tax Planning

 By advising clients on tax-efficient investment strategies and locating tax deductions and credits, financial advisors help customers reduce their tax liability.

  1. Estate Planning: 

Financial advisors help clients make arrangements for the transfer of their assets following their passing by drafting a will, setting up trusts, and lowering estate taxes.

  1. Debt Management: 

By developing a repayment strategy and offering guidance on debt consolidation and refinancing, financial advisors assist customers in managing their debt. 

5 Factors to consider when choosing a financial advisor

Handling all aspects of finance requires time and expertise. While you can always DIY it, a financial advisor would probably save you some time and money. Here are a few factors that you should consider while choosing a financial advisor:

  1. Experience
  • Consider the experience and professional background of the prospective advisor.
  • Look for advisors who have worked through various cycles of the economy. 
  • Ask for references to understand how they deal with their clients.
  1. Licenses
  • Ensure that someone who is helping you plan your finances does not have a conflict of interest.
  • Advisors who are licensed in a particular category of investments should sell you only those investments. For example, 
  • mutual fund distributors should have a certification by the Association of Mutual Funds in India
  • SEBI-Registered Investment Advisors (RIA) offer unbiased and personalised investment advice to clients based on their financial goals, risk profile, and investment preferences.
  • Research reports are provided by SEBI registered Research Analysts (RAs).
  • Many other licensed professionals like Certified Financial Planners (CFPs) or Chartered Accountants (CAs) can help you manage your finances.
  1. Profiles of clients managed by your advisor
  • A few financial advisors have carved a niche for themselves. They have solutions customized for particular types of clients, say, salaried individuals.
  • Check if they have clients that you know. This makes it easier for you to check their track record.
  1. Communication skills
  • The financial world might already seem daunting for some, and then comes the jargon.
  • A good financial advisor should be able to explain your finances to you in a simple manner and help you get over your preconceived notions in the most unbiased way.
  • Check their objection-handling strategies. This is like an acid test for financial advisors. If they handle your objections effectively, half the battle is won.
  1. Professional Fee
  • This varies according to expertise, experience, and service quality.
  • An advisor may not be your best bet just because they are charging a higher fee.
  • Take the time to understand the fee structure of your advisor. Check if it is aligned with your goals.
  • Have a clear discussion at the beginning and set expectations accordingly.

Should financial advisors be registered?

There’s hardly a law that regulates a self-proclaimed financial advisor. While many people call themselves advisors, not all of them have your best interests in mind. 

For example, fee-only financial advisors do not have a conflict of interest while recommending financial products. Their income comes from their clients and not from products that offer commissions and brokerage. Thus, they recommend products that work best for you.

In India, all financial advisors need to register themselves with the Securities and Exchange Board of India (SEBI). 

Registered Investment Advisors

Registered Investment Advisors (RIAs) are companies that employ Investment Advisor Representatives (IARs), who are bound by fiduciary duty. 

IARs may refer to themselves as financial advisors and may be fee-only or fee-based. Some may have additional credentials, like the Certified Financial Planner (CFP) designation.

Financial advisors with the CFP credential have passed demanding professional tests in real estate, investments, insurance planning, and so on. They may have years of experience in their fields.

CFPs are suited to assist you in planning out every aspect of your financial life due to their extensive expertise. They could be particularly beneficial for people in complicated financial situations, such as those managing significant debt balances and estate, trust, and will planning.

Fee-only advisors

Fee-only advisors earn money from the fee that you pay them for their services. This fee is usually charged as a percentage of the assets they manage for you, as an hourly rate or a flat rate. 

Generally speaking, these advisors are fiduciaries. They have chosen to work under a fee-only model to reduce any potential conflict of interest.

They must register as financial advisors or Registered Investment Advisors (RIA) with SEBI. 

  • They need certifications such as Chartered Wealth Manager (CWM) accredited by the National Institute of Securities Markets (NISM).
  • CWM certification is offered by the American Academy of Financial Management (AAFM) India and approved by AAFM US.

Commission-only financial advisors

Commission-only financial advisors make money by earning commissions from third parties. While working with these advisors, you need to take extra care as they may not be fiduciaries. 

They require the following certifications:

  • Insurance IRDA Examinations IRDAI IC 38. IRDAI stands for Insurance Regulatory and Development Authority of India.
  • Chartered Wealth Manager certification accredited by NISM.
  • CWM certificate offered by AAFM India approved by AAFM US.

Robo Advisors

Robo-advisors provide automated, inexpensive investing advice. Most focus on providing investment advice for medium- and long-term goals, such as retirement, using pre-built diversified exchange-traded fund (ETF) portfolios.

Experts say that these advisors are especially suitable for younger people who are tech-savvy, especially if they are not going to get in-depth advice on insurance, retirement, and taxes.

Should you be wealthy enough to hire a financial advisor?

One doesn’t have to be Richie-Rich to hire a financial advisor. Regardless of wealth, financial advisors offer useful services to anyone. In fact, many of them prefer to work with the middle-income segment, as the benefits of hiring a financial advisor are likely to outweigh the costs at this level.

In Closing

In this article, we understood that financial advisors are professionals who help common folks manage various aspects of their wealth and financial goals. There are various types of advisors who cater to the different needs of their clients. Remember that one doesn’t have to be rich to hire a financial advisor. That’s all for this article, folks. We hope to see you around until next time. 


What does a financial advisor do?

A financial advisor provides financial advice to customers in return for compensation. They can help you tailor a plan for meeting your financial goals, save more, invest wisely, save taxes, and reduce debt.

What is the difference between a financial advisor and a financial planner?

Anyone who offers clients financial advice or direction falls under the wide definition of a financial advisor. On the other hand, a financial planner is a particular category of financial advisors who specialize in helping customers develop thorough financial plans. This includes planning for retirement, estates, taxes, and investing.

Can a financial advisor help me with debt management?

Yes, financial advisors can help you with debt management. They can help you create a budget, develop a debt repayment plan, and provide guidance on how to reduce your debt over time and eventually become debt-free.

How do financial advisors get paid?

Financial advisors may charge a flat fee, an hourly rate, or a percentage of the assets they manage, or earn commissions on the financial products that you invest in. It depends on the type of financial advisor you are working with.

How do I know if a financial advisor is trustworthy?

Make sure that you check a financial advisor’s credentials before hiring them. Look for a fiduciary advisor with good educational credentials and experience. Ask for references from the advisor and follow up with them. You could also check online reviews and ratings to get a sense of the advisor’s reputation. Ultimately, if you don’t feel comfortable with an advisor, it’s okay to keep looking until you find the right fit.

What do financial advisors do?

What do financial advisors do?

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