What Does a Financial Advisor Do?
A financial adviser or financial planner is an individual who offers financial advisory services to customers according to his or her financial circumstance. In most countries, financial advisers must first complete certain formal training and be certified with a regulatory body if they wish to offer financial advice to clients. This financial advice can be in the form of advice about investing, saving, pensions, insurance and other relevant financial issues. Some advisers specialize in particular areas of financial advisory.
In United States, the most common type of financial advisors are brokers or sales representatives who provide general, advisories, and transactional advice to investors and / or clients. Brokers are also responsible for undertaking various transactions for their clients. Typical transactions include purchase and sale of securities, the purchase of options and warrants, among others.
Financial Advisors must meet a certain minimum requirement, such as a three-year degree from an accredited college or university. Others are required to obtain their license or registration from the appropriate regulatory body. Most regulatory bodies require that individuals providing financial planning services have both a fiduciary responsibility and financial expertise as well. The most important role of these professionals is to make decisions that are in the best interest of their client(s), and to determine which investment strategies are right for them. They ensure that their clients comply with legal requirements and tax regulations by understanding all applicable laws, including those related to securities licensing.
Financial Advisors is responsible for setting and achieving the following objectives: to contribute to the achievement of the company’s goals and objectives; to serve as the voice of the firm on matters relating to its finance, accounting, internal control, ownership and control issues, among others. Their work style is imperative to the achievement of these goals. The role of a financial advisor varies according to the needs of the client(s). Some are direct, while others act as a liaison between executives and their clients, and yet others provide overall direction. They also provide advice on investing and financial management and are involved in investment decisions and their analysis.
The role of financial advisors has come under increased review and regulation in recent years because of the need for investment advice to be both reliable and effective. In view of this situation, the United States passed and implemented the Sarbanes-Oxley Act in 2021, which sought to strengthen the fiduciary standard, to discourage financial advisors from taking conflicts of interest and other inappropriate action that might harm their clients. In order to qualify under the new Act, financial advisors have to demonstrate that they take all actions in accordance with the law and that they provide the best investment advice to their customers.
Professional financial advisors have traditionally had an independent viewpoint, but now-a-days, even the financial advisors who are registered with the State Street Corporation and the Securities and Exchange Commission (SEC) work for the companies they advise. They are also expected to work in tandem with stockbrokers and other marketing professionals who work for brokerage firms. They can also be represented by law firms. In general, there is little if any difference between an independent and registered financial advisor, and the services they render will be the same. However, the registered representatives cannot have a conflict of interest with the companies they recommend, whereas the unregistered representatives can represent multiple companies. In addition, financial planners can choose to become members of professional organizations such as The Association of Personal Financial Advisors and the Financial Planning Association.