What Is a Financial Advisor [2024] Do I Need a Financial Advisor 

Sometimes, it makes sense to seek help from a professional to work out your finances. Sure, you can do it on your own, but paying for help can be worth it. This is especially true if it helps save you money in the long run and helps you reach your financial goals. 

More than half of Americans have worked with a financial planner – a type of financial advisor – at some point. If you’re considering working with one, it’s important to have a clear answer to the question, “What is a financial advisor?” You’ll also need to know which type could best help you reach your goals. 

What Is a Financial Advisor?

A financial advisor is a professional who helps you with managing your finances. Some guide you with doing it yourself while others can manage your finances for you. 

Keep in mind that the term financial advisor can encompass a large selection of people offering various types of services. Some may be bound by a fiduciary duty and follow certain ethics while others may be paid through commissions of products they sell.

Some of what a financial advisor can help you with includes:

• Planning short-, medium- and long-term financial goals
• Creating a realistic budget and savings plan
• Investment planning services like figuring out your 401k and the best way to invest money for when you’re ready to retire
• Provide guidance on taxes
• Figuring out what insurance products you may need to protect your property and loved ones
• Managing your investments, including balancing your portfolio when necessary

Who Needs a Financial Advisor? 

“Okay, great,” you may be thinking, “but do I need a financial advisor?”

The answer will depend on what you’re hoping to get help with. If you’re finding it difficult to see what financial goals you need to prioritize or aren’t sure whether your plans will help, it may be time to seek professional advice. 

However, if you’re just getting started looking at your finances or how to grow your wealth, you may be better off learning on your own first. Our guide on investing for beginners may be helpful.

Some situations where it may make sense to hire a financial advisors include situations where:

You want a second pair of eyes

Maybe you already have a budget and a short- and long-term savings strategy in place, but you’re not sure whether it’ll help you reach your financial goals. A financial advisor can look over your plan to see what’s working and make any recommendations necessary. 

You have a complex financial situation

Financial advisors are generally trained on and can understand more complex financial matters like taxes, estate planning and working with those with more complex family dynamics. These types of professionals can also help you with strategies you want to implement but aren’t sure about, like setting up a donor advised fund. Business owners and those who’ve suddenly come into a large sum may also want to consider seeking the guidance of a financial advisor. 

You want to save money

Paying investment fees can cost you tens of thousands of dollars or more over your lifetime, and you want to be able to maximize your money. Perhaps you’re looking into alternative investments or want to be sure your investment portfolio of stocks will give you enough to retire on. 

If so, working with a financial advisor can help you save money if they’re able to find investments that can help you pay less in fees while helping you reach your other goals. 

How Do I Find the Right Financial Advisor for Me? 

So we’ve answered the question, “What is a financial advisor?” Next, it’s important to find one you can trust to help you reach your goals. 

First, figure out what it is you want out of working with one. Then you can determine the type of financial advisor you want to work with.

Some types of financial advisors you can work with include:

• Brokers: An investment broker is a financial professional who helps clients buy and sell investments like stocks and bonds. If you would rather do this yourself, you can look into brokerage companies. Check out our Robinhood review to learn about one you can use. 
• Robo advisors: While not a human advisor, these automated services use proprietary algorithms to help you come up with an investment portfolio that will help you reach your goals. Some may offer the occasional session with a financial professional to help with other aspects of your finances. 
• Financial planners: These professionals work with you on a more holistic view of your finances, often creating a comprehensive financial plan, and may hold financial designations and follow a certain set of ethics.
• Traditional financial advisors: These professionals may be less holistic in their approach than financial planners and more focused on how you could invest within your comprehensive financial plan. Like financial planners, they may also be bound to a certain set of ethics or have certain financial designations. 
• Wealth managers: Wealth managers usually work with those who have a lot to invest and help them manage their finances in areas like tax and estate planning and allocating investments in their portfolio. 

Once you’ve determined what kind of financial advisor you want to work with, take the time to speak with a few so you can get a sense of how they work and what they charge. Be sure to ask what you’ll need to pay, whether the financial advisor receives commissions and what designations they may have. And of course, checking out online reviews is always a good idea too.

It’s also important to see whether the financial advisor is a fiduciary — and therefore legally bound to work in your best interest.

Pros and Cons of Using a Financial Advisor

Pros	Cons
Professional help with creating a financial strategy	Could pay high fees
More free time	Some advisors may require a lot of upfront cash to invest
Could help you save money overall	Not all advisors are trustworthy

Commonly Asked Questions About What Is a Financial Advisor 

Alternatives to Using a Financial Advisor?

Instead of working with a financial advisor, here are are some alternatives to consider:

• Take advantage of employer benefits where you can seek one-off advice.
• Open an account with a robo advisor.
• Read personal finance and investing books and blogs, watch videos, or listen to podcasts
• Take personal finance classes online or at your local library

How to Know If I Need a Financial Advisor? 

Knowing the answer to the question, “What is a financial advisor?” is the tip of the iceberg. It’s also important to know whether you need to work with one. 

Some scenarios where it may make sense:

• You’re going through or have gone through a major life change.
• You want to save money for retirement but aren’t sure where to start.
• You have a complicated situation, like running a business.
• You want to be sure your financial plans will help you work toward your goals. 

Should I Get a Financial Advisor If I Have Little Money? 

Answering the question, “Do I need a financial advisor?” typically has more to do with what your financial goals are than how much money you have. There are plenty of options for seeking financial or investment advice even if you don’t have a lot to work with. 

For example, if you want to know if your portfolio allocation will help you reach your long-term financial goals, then you can open a robo advisor account. Many of these types of companies don’t require you to invest huge sums of money and can help you with your investments. Or, you may find financial advisors that help give back to the community by offering free or reduced services. 

Signs a Financial Advisor Is a Good Fit

Signs a specific advisor would be a good fit include:

• You feel comfortable working with them.
• You’re clear on how you pay this person.
• You’ve been reaching financial goals after working with your financial advisor.

Signs a Financial Advisor Isn’t a Good Fit

Sometimes despite the best of intentions, the financial advisor you work with isn’t a great fit. Some signs include:

• The financial advisor is pressuring you to buy certain products or invest in certain securities.
• It’s hard to reach the financial advisor.
• You’re confused about how they’re being paid.

Is a Financial Advisor the Same as a Financial Planner?

No, a financial advisor is not the same as a financial planner. But a financial planner is a type of financial advisor. A financial advisor is a general term that encompasses different types of professionals that help you with your money, including insurance agents, financial counselors and stockbrokers. A financial planner, on the other hand, tends to work with clients long term, specifically on their financial goals, like budgeting and investment strategies.

Knowing what a financial advisor is will help you know what to look for when seeking help with your money.