In the broadest sense, a financial advisor is anyone you pay to help you manage your money, especially as it relates to retirement goals. This could be a stockbroker, an accountant, a retirement specialist in your company HR department, your uncle Steve (“He’s so good with numbers!”)… anyone. It’s a generic term. And it can come with a lot of sets of initials that make an advisor seem very capable and educated and experienced but really don’t add up to much. Unless you’re talking Certified Financial Planner™ (more on those in a bit.)
What does a financial advisor do?
A financial advisor helps you create and execute a financial plan. Your advisor determines how much money you have now, how much money you’ll need for the future, and how you’ll grow it. And then… hopefully helps you grow it! Either by guiding you as you make certain decisions or making almost all of the decisions for you.
The first thing a financial advisor does is listen and learn. And they want to learn a lot. Most financial advisors will send you a worksheet or questionnaire to get things started. It can be a long set of questions, because they need to know as much as possible about your financial landscape (hopefully it’s a very green place). This includes your debts, your income, your tax situation, and any other factor that will affect your financial future. They need to uncover everything and shine a light on your finances so they know which tools to apply and how to apply them. Jon Needham, a Senior Director of Distribution at Wealthsimple explains this information empowers advisors to manage your finances so you’re ready for whatever life throws at you in the future.
As well as providing advice, many advisors will invest your money in a variety of stocks, bonds, or real estate. This may be the sole focus of some advisors. They will pick investments you and help control your investing behaviour, helping you to avoid panic buying and selling.
One underrated quality of a great financial advisor is empathy. Your financial advisor needs to understand your worries about your financial future. It’s one thing to get a sense of your goals. That’s pretty straightforward. Many people will look for a financial planner if they have money worries. The right financial advisor for you will try and uncover your worries and allay your fears through reassurance, concern, and at least a rough description of initial steps you can take to get on the right path. At least, that’s what a great financial advisor should do.