What Is a Personal Financial Advisor?

A personal financial advisor is a professional who provides financial advice and services to clients according to their specific needs. Personal financial advisors have the expertise and experience to deliver solutions tailored to their customers' needs, avoid costly errors, and mitigate risk, as well as offer a suite of services and products aligned with clients' current and future goals. Some financial advisors receive a flat fee for their advice, while others earn commissions from the sale of investments.

Key Takeaways

  • Personal financial advisors are professionals who offer tailored financial advice and services to customers.
  • In the US, financial advisors hold the FINRA series 7 and 65 or 66 licenses and may hold various designations, such as Certified Financial Planner (CFP®).
  • Financial advisors first develop a financial plan for their clients, which evaluates their current and financial needs and considers many facets of their life.
  • Good financial plans are fluid and will keep the client aware of changes that affect them and their investments.

Understanding Personal Financial Advisor

Finding a personal financial advisor can be a daunting and confusing task as there are many financial services professionals whose duties are similar to those of financial advisors. Professional organizations like the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) can help locate advisors in your area. When choosing a financial advisor, it is important to verify their history and credentials. For example, ask if they have FINRA licenses or professional designations. In the US, financial advisors hold FINRA series 7 and series 65 or 66 licenses. Certified Financial Planner® (CFP®), chartered financial analyst (CFA), chartered financial consultant (ChFC), and registered investment advisor (RIA) designations are good indicators of an advisor's experience and training. Also, financial advisors may act in other capacities. For instance, they may be accountants, legal professionals, or brokers.

Personal Financial Advisor and Individual Financial Plan

Before providing advice and recommending products and services, financial advisors create financial plans for their clients. This involves a comprehensive evaluation of their current and future financial state. It also considers critical, basic information, such as age (time horizon), financial goals (saving for education, purchasing a home, preserving capital, or generating income), and an appetite for risk and reward. This is often based on education, net worth, and experience in the public and private markets. Additional aspects of financial plans can include tax liabilities, asset allocation, and future retirement and estate plans. Financial plans can use variables to predict future cash flows, asset values, and withdrawal plans.

A good personal financial advisor won’t re-use templates on different clients. While the majority of financial plans will include research into and considerations of the client's life goals, wealth transfer plans, and projected expense levels, a personal financial advisor should take time to incorporate unique aspects of each customer’s financial journey, including attitudes towards investing, budgeting, and continued education about financial topics. A good financial plan will alert an investor to changes that must be made to ensure a smooth transition through life's financial phases, such as decreasing spending or changing asset allocation. Financial plans should also be fluid, allowing for occasional updates.

Many personal financial advisors elect to join wealth management firms like Fidelity, Vanguard, and Charles Schwab that provide tailored financial advice to high-net-worth and retail customers. Some larger asset managers like Morgan Stanley and Goldman Sachs also have robust wealth management arms for high-net-worth individuals.