What a Financial Advisor Does

A financial advisor is an expert on personal finance who offers advice regarding how to invest and spend your money. They are used by individuals of every economic bracket, as well as businesses of all sizes, and even the government. In dealing with personal finance, the financial advisor offer help regarding insurance options (particularly life insurance), mortgages, pension planning, and investment advice regarding asset allocation (where to put your money). It&;s important that, when giving financial services, an advisor take your personal financial situation into account to help you achieve the best quality of life. When evaluating your personal finances, a financial advisor will take into account stocks and bonds, personal assets (like real estate), options, insurance plans and products, and mutual funds. There are three types of financial advisors: those that are fee-based, fee-only and commission-based.

The fee-based financial advisor is the most common type of financial services in the United States right now. They make their money in a combination of standardized fees and percentage-based gains. Standardized fees will not change over time and most commonly come in the form of an hourly rate for financial services. Sometimes financial planning fees are applied, which sets a monetary value to the amount of work the advisor is doing. They also make money by collecting a percentage (typically one percent, no more than five percent) of the money with which they deal, or the amount of your assets the manage. Although the percentage rate will stay the same, the amount collected will fluctuate if your financial advisor is successful because you&;ll be making more money for them to manage.

There is also the fee-only financial advisor, who collects solely standardized fees. In general, fee-only advisors deal with either minimal assets or short-term clients. The amount of money typically does not change from year to year, although like anything, the costs of standardized fees are sometimes increased over time. Most fee-only advisors collect an hourly rate for consultations, and the rates vary greatly depending on location, as well as the expertise and experience of your advisor. Sometimes your personal finance is taken into consideration by the determination of fees, as many advisors offer reduced rates for people on the brink of bankruptcy.

The third kind of advisor is one who is commission-based. These advisors are generally marked by long-term commitments and a huge network of interrelated clients. They make some money off of your personal finances by collecting a percentage of the assets they manage for you, much as a fee-based advisor does, although typically advisors who are commission-based will have higher percentage rates of collection than those who are fee-based. In addition, these advisors also collect a commission from each business in which they help you invest, putting these financial advisors at risk for conflicts of interest.