What does a financial adviser do? A financial adviser, also known as a financial planner or investment consultant is an independent professional that provides financial advice to clients according to their individual financial situation. In the United States, registered representatives of the National Association of Personal Financial Advisors are required to complete specific financial education and certification courses and meet continuing education requirements. In most other countries, financial advisers must still complete certain training and be formally registered with a regulatory board in order to offer advice to clients. While investment advisers may work independently of firms, they report directly to the principal such as a bank or brokerage firm.
The primary duty of these advisors is to advise their client on the appropriate investments and transfer of assets according to their financial status. Some advisers also provide additional services like estate planning and asset protection. There are also some specialized areas that these advisors specialize in such as asset allocation, foreign investments and residential mortgages. Some people would consider financial advisors as “money managers” while others would view them as “financial planners.” The most important function of a financial advisor is to guide their clients in sound investment practices.
Besides advising, these professionals also perform other important functions such as providing investment advice and financing investments. Many financial advisors also evaluate various investment options and decide on the most suitable investment options for a particular client. They often meet with their clients and discuss investment strategies and options. Other duties of financial advisors include performing insurance coverage, tax consulting and tax planning and advice on retirement accounts, pension policies and mutual funds. Some financial professionals work exclusively in the field of estate planning, while there are others who also work in investment management firms providing general financial advice to individuals, families and companies.
There are different types of financial advisors including self-employed advisers, certified financial planners, independent financial planners, and registered investment consultants (RIC). These different types of financial advisors have different roles and provide different services. Self-employed advisors are usually employed by their own firms while certified financial planners are generally employed by firms that provide complete financial planning services. Financial advisors with their agencies charge slightly higher fees than solo professionals. They also usually charge a higher fee for insurance coverages and other additional services. Finally, registered investment consultants (RIC) are licensed by the state to offer investment advice to their clients on the basis of their client’s financial goals and risk tolerance.
Some of the main features of a robo-advisor are that it recommends investments in the market that it believes to be a high risk/reward. Its investment recommendations are not based on the standard investment objectives of marketability, income potential, growth potential, and safety of the investment. For instance, a robo-advisor may recommend an investment in mortgage backed securities (MBS) when its opinion is that the market may fail to meet the criteria for regular investments. This scenario occurs when the real estate value is lower than the MBS rates offered by major banks. The reason for this recommendation is that the client has a high risk tolerance and therefore is unlikely to experience any significant losses on the mortgage-backed securities.
Most US residents do not understand what is meant by the word ‘fiduciary’. A qualified financial advisor works within the regulations of the law, which is to ensure that the interests of their client i.e. the investor or borrower are served equally at all times. Most US residents are unfamiliar with the concept of the word ‘fiduciary’. In general terms, financial advisors work on behalf of their clients by providing advice and selecting investment opportunities on their client’s behalf.