What Does a Financial Advisor Do?

A financial advisor reviews the financial situation of individuals and businesses, and helps them manage money by setting clear financial goals and developing a personalized financial plan. They specialize in financial planning, investment management, retirement planning, estate planning, insurance planning, and tax planning. By assessing income, expenses, assets, liabilities, and risk tolerance, they create strategies that perfectly align with the client's specific needs and objectives. Financial advisors also track progress over time and make adjustments as priorities and market conditions change.

There are various types of financial advisors, such as Certified Financial Planners (CFPs), Chartered Financial Consultants (ChFCs), and Chartered Financial Analysts (CFAs), each specializing in specific areas of financial management. Working with a financial advisor provides clarity, reduces financial stress, and plans so that your financial goals are met in a structured, strategic manner. In the following sections, we will explore the key roles of financial advisors and how their expertise can help you plan for a comfortable future.

Financial Planning

Financial planners help individuals and businesses make major money decisions by translating financial goals into a clear, actionable plan. They review income, expenses, assets, liabilities, and savings to establish a clear financial baseline, then prioritize goals like debt reduction, emergency savings, home purchase, education fund, or long-term investment growth. A planner also assists business owners by separating personal and business finances while setting cash flow targets for stability. Their guidance matters to clients because it replaces uncertainty with a clear financial road map that supports consistent and impactful decision-making.

Investment Management

When managing investments for clients, financial planners focus on aligning portfolios with financial goals, risk tolerance, and timeframe. They determine asset allocations, recommend diversified investments, monitor performance, and rebalance portfolios as market conditions or priorities change. For example, a planner may adjust a portfolio for a client nearing retirement by reducing volatility while preserving income potential. This approach supports consistency and discipline, helping portfolios stay aligned with long-term objectives rather than short-term market reactions.

Retirement Planning

A retirement advisor prepares clients for life after work by converting long-term savings into sustainable future income. They do this by reviewing current income, expenses, retirement accounts, expected retirement age, and risk tolerance, then projecting future spending needs based on lifestyle goals. Using this assessment, retirement advisors set savings targets, recommend account contributions, and design investment and withdrawal strategies. For example, a retirement advisor may coordinate 401(k) savings, taxable investments, and Social Security timing to produce a predictable long-term cash flow. This planning supports income stability and reduces the risk of depleting retirement assets prematurely.

Estate Planning

For long-term asset transfer, financial planners organize assets and clarify how wealth should transfer to future generations over time. They help clients review beneficiary designations, ownership structures, and long-term legacy goals, then coordinate with estate attorneys on wills and trusts. As part of this process, planners often address competing priorities within a family, such as funding education while protecting future inheritance. For example, a planner may help parents structure asset distribution to support education expenses without disrupting long-term estate intentions. This brings clarity, reduces avoidable tax issues, and aligns financial outcomes with family priorities.

Insurance Planning

Financial advisors acting as insurance agents review financial obligations, income sources, healthcare needs, and existing insurance products to address risks that could disrupt long-term financial plans. They evaluate coverage such as life insurance, health insurance, disability insurance, and property insurance within the context of cash flow, debt, and family responsibilities. Based on this analysis, planners recommend appropriate coverage levels and policy structures. For example, a planner may adjust life insurance coverage after a family adds dependents or takes on new debt to protect ongoing financial commitments.

Tax Planning

High-net-worth individuals and businesses rely on financial advisors to reduce tax burdens by reviewing income streams, investments, and assets to uncover tax-saving opportunities. In complex situations, financial advisors may also coordinate with a Certified Public Accountant (CPA) to analyze how account types, portfolio decisions, and asset structures affect taxes.  After this analysis, advisors apply tax-efficient strategies like retirement contributions, capital gains planning, and tax-loss harvesting to improve net returns. For example, an advisor may recommend placing certain investments in retirement accounts instead of taxable accounts to help clients keep more of their income and investment gains over time.

What Are The Types Of Financial Advisors?

Financial advisors hold designations of Certified Financial Planners ® (CFP®), Chartered Financial Consultants® (ChFC®), Chartered Financial Analysts® (CFA®), and Chartered Mutual Fund Counselors® (CMFC®), each with different areas of specialization and training paths. Understanding these distinctions allows individuals and businesses to select the right type of financial advisor whose expertise matches the complexity of their financial goals, investment needs, and long-term priorities.

• CFP® (Certified Financial Planner®): CFPs® develop comprehensive financial plans that integrate retirement planning, investment management, tax strategies, estate planning, and risk management. They are trained in broad financial planning disciplines and ethical decision-making, which supports their role as holistic, fiduciary-focused advisors. This background enables CFPs® to guide long-term goal setting and ongoing plan adjustments. A CFP® is well-suited for individuals or families who want one advisor to oversee all major financial decisions.
  

• ChFC® (Chartered Financial Consultant®): To address complex financial situations involving investments, retirement planning, tax strategies, estate planning, and major life events, ChFCs® deliver detailed and adaptable solutions. They focus on personalized planning that reflects changing personal or business circumstances rather than one-size-fits-all strategies, allowing their strategies to evolve. A ChFC® is a strong fit for individuals or business owners who require tailored financial guidance as their financial complexity increases.
  

• CFA® (Chartered Financial Analyst®): CFAs® focus specifically on investment analysis, portfolio management, and risk assessment for complex investment portfolios. They evaluate securities, build asset allocations, and monitor performance using disciplined, data-driven methods. Their training in financial analysis and market behavior supports precise investment decision-making across changing market conditions. A CFA® is best suited for investors whose primary need is professional oversight of sophisticated portfolios rather than full-scope financial planning.
  

• Chartered Mutual Fund Counselors® (CMFCs®): More narrowly focused than CFAs®, CMFCs® specialize in mutual fund analysis and fund-based portfolio management. Their training centers around evaluating mutual fund performance, diversification strategies, and long-term fund selection. This specialization enables CMFCs® to support investors who rely heavily on mutual funds rather than individual securities. A CMFC® is ideal for clients whose investment strategy is primarily built around diversified mutual fund portfolios.
  

Why Work with a Financial Advisor?

Working with a financial advisor helps individuals and businesses manage complex financial decisions with structure, clarity, and long-term focus. By aligning financial planning, investments, taxes, and risk management into a highly adaptable and coordinated strategy, they help achieve long-term financial goals with greater consistency and fewer costly mistakes.

10 benefits of working with a financial advisor:

1. A personalized financial plan aligns income, goals, and financial priorities.

2. Retirement planning supports a stable income and financial independence over time.

3. Assets become more profitable as portfolios align properly with risk tolerance and objectives.

4. New investment opportunities are identified through ongoing analysis and portfolio review.

5. Lower tax liabilities result from coordinated, tax-efficient financial decisions.

6. Legal penalties are avoided by maintaining compliance with financial and regulatory requirements.

7. Generational wealth transfer becomes smoother through organized estate and legacy planning.

8. Long-term strategy with informed, experience-based planning replaces guesswork.

9. Financial uncertainty is addressed by planning for market changes and life events.

10. Time is saved by delegating financial monitoring, research, and decision-making.
    

What Does a Financial Advisor Cost?

A financial advisor ‌costs 0.75% to 1.25% of assets under management (AUM), $2,500 to $9,000+ as a flat fee, $200 to $400 per hour, or commissions, depending on how services are structured. Some advisors charge ongoing fees based on the assets they manage, while others offer flat or hourly pricing for financial planning and advice. Commission-based compensation is typically tied to investment products such as mutual funds, annuities, insurance products, or structured investments. Understanding how much financial advisors cost and how advisors charge for their services helps set clear expectations and evaluate their long-term value.

How to Choose the Right Financial Advisor?

Choosing the right financial advisor is essential for achieving your financial goals, whether you are saving for retirement, managing investments, or planning for other major life events. Here are the key steps to follow when selecting an advisor:

• Check if the advisor is licensed and registered with regulatory bodies like the SEC or FINRA.

• Understand how they charge by clarifying whether the advisor uses fees, commissions, or a combination of both.

• Review their experience in retirement planning, investment management, or estate planning to ensure they align with your specific goals.

• Verify their values align with yours by confirming that the advisor acts as a fiduciary, prioritizing your best interests in all decisions.

• Seek referrals and check trustworthiness by asking for recommendations from trusted sources and verifying the advisor’s credentials through background checks or online reviews.
  

Taking the time to evaluate these factors helps you choose the best advisor for your specific financial situation. A trusted financial advisor provides objective guidance, long-term planning, and strategies designed around your best interests. Disclosures:

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Asset allocation does not ensure a profit or protect against a loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A. an affiliate of LPL Financial.