A financial advisor is a professional who advises clients on financial matters in order to fulfill their goals. The clients may be governments, companies and individuals. The financial advisor main purpose is to understand the client's financial situation and advise him in planning and arranging finances to manage savings, tax, education, retirement, mortgage, investments and wills.
There are many financial decisions that are made and consulting a financial advisor is advisable so they can give financial balancing and stability. They use finances which may include-:
- investments in stocks, bonds, mutual funds and trusts, futures, options
- asset investments
- insurance products
- mortgages and loans
The client requires advice on how to balance income, assets and risk. Today people are finding it difficult to grow their capital and income to meet current and future needs. Financial planning can become complex and one will need a financial advisor who will take all current and future financial goals and purpose of the client and prepare a financial plan taking into consideration risk and the client's lifestyle. He will allocate assets and other resources to achieve those goals and purpose. There are many mortgage, insurance, education and pension products in the market today and the financial advisor must advise the client accordingly using the goals to guide the course of action.
The financial advisor will assist the client to create a portfolio of investments which include stocks, bonds, mutual funds, options, futures and annuities. He will help the client invest in short-term and long-term investments depending on the client's goals and his risk tolerance. Clients who have short-term goals may invest in bonds while those with long-term goals may invest in real estate, stocks, mutual funds, futures and annuities among others. He will plan for real estate investments, mortgages and loans. He will assess client's risk and liability and advice on the insurance products available and ensure that he is covered.
The financial advisor will allocate the income to the financial needs of his client which may include buying a house, a car, paying college education for client's children, paying tax and insurance. He needs to have knowledge in investing, budgeting and forecasting, risk management, taxation and asset allocation. He should advise the client on how to minimize tax and ensure that it is paid. They assist their clients plan and buy life assurance and other insurance policies depending on their set goals. The financial advisor will help in financial planning of the investments and income so they meet the retirement goals of his client. He determines what percentage of the available income should be allocated to retirement.
There are three licenses for financial advisors which include-:
- investment Advisor Representative
- Stock Broker
- Insurance Advisor
The financial advisor can hold any combination of the above licenses depending on their financial practice. These are regulated and he must pass a particular exam. They are paid a commission or a fixed or hourly fee for the hours worked.