What Do Financial Advisors Do?
What are financial advisers? A financial adviser or financial consultant is a qualified professional that provides financial advice to potential customers based on his or her individual financial circumstance. In most countries, financial advisers must undertake specific registration with a regulatory board and obtain certain educational training in order to give advice to their customers. In the United States however, financial advisers are not regulated by government agencies and are not required to be licensed.
Why would you want to hire a financial advisor? Many people today are self-employed; meaning that they do not work for an employer or with an employer-sponsored insurance scheme. While these people will probably have some idea of what their employer covers (many employers do not), they may not know or understand how their own policies or choices around investments work. Alternatively, self-employed individuals may be in a position where they need to make large investments, such as buying a business or starting a new venture, in order to grow or expand their finances, or to protect against financial losses that might otherwise erode their net worth.
As such, a large number of self-employed individuals turn to financial advisors for advice and guidance on investments and on their overall financial portfolios. The role of the advisor, therefore, becomes more critical if investments are made in ways that are not particularly well suited to the self-employed or those who have a limited knowledge of investments or those who have no interest in investments themselves. For example, if you are self-employed and your financial products include property, then it makes sense for you to talk to a planner or financial advisor who deals specifically with properties and investments. Your planner or advisor will be able to advise you on which investments to put money in, when to sell or rent them and when to use financial products to offset risks associated with your investments.
As well as advising their clients on investments and how to create financial products to protect or grow their capital, financial advisors also help their clients work towards financial goals. For example, some people want to have a large capital sum so that they can start a family business or buy a large piece of property. Others want to build a retirement portfolio or plan for the future by building retirement assets. Whatever the case may be, all self-employed and small-business owners want to achieve their goals, and financial advisors can help with this as well.
In addition to helping you meet your current and future goals, a financial advisor will help you map out your financial future. How does this work? When you set up a savings plan, for example, you will be required to set out specific future goals such as how much you want to save for retirement, how much you want to invest in your own business, etc. Your financial advisor will help you develop a strategic plan for achieving these future goals. This includes looking at your investment strategies, looking at tax implications and determining which tax bracket you are in, and evaluating your borrowing and debt as it applies to achieving your future goals.
As you can see from the above example, there are many different areas where a financial adviser can help their clients. However, many self-employed and small-business owners are not well-informed about the services that these advisors offer. If you are an owner of a small business, you should consider engaging the services of one of these advisors to ensure that your company is able to reach its goals and that your finances are in the best possible position.