Financial advisor

Also called Financial adviser, Financial planner

A professional who helps people plan and manage money, such as investing, retirement, taxes and insurance, for a fee or commission.

What it means

Financial advisor is a broad label, not a protected title, so it can describe anyone from a certified financial planner to an insurance salesperson. Advisors may build investment portfolios, create financial plans, help with retirement income or coordinate taxes and estate planning. Credentials, licenses and regulatory records can be looked up through public databases.

How an advisor is paid shapes their incentives. Fee-only advisors are paid directly by clients, by a percentage of assets managed, a flat fee or an hourly rate. Commission-based advisors earn money from the products they sell. Fee-based advisors mix both. Registered investment advisers owe a fiduciary duty, while brokers follow a separate best interest standard.

Example

Suppose an advisor charges 1% a year of assets managed. On a $500,000 portfolio, that is $5,000 a year, in addition to any fund expenses. A flat-fee planner might instead charge a set price for a one-time plan.

How it’s used

Planning for retirement or a major life change
Getting help with complex taxes, an inheritance or a business sale
Getting a second opinion on an investment strategy

Strengths and weaknesses

Strengths

Expert guidance and a coordinated plan
Can provide discipline during market swings
Saves time on research and paperwork

Weaknesses

Fees can significantly reduce long-term returns
Commissions can create conflicts of interest
Quality and credentials vary widely

Good to know

Ask how the advisor is paid, whether they act as a fiduciary, and what credentials they hold.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.