The Role of the Financial Advisor

There are many misconceptions about the role of the financial advisor, the subjects covered, and what they can do for you. Unfortunately, in years gone by, it tended to be wealthy that were more closely associated with financial advisors. Then we saw the boom in worldwide investment in the 1980s, the deregulation of the financial services industry, and individuals being given greater control of their finances. Consequently, the role and reach of the financial advisor expanded dramatically.

So what should you expect from your financial advisor, and are they worth the money?

Different types of financial advice

While a financial advisor is often described as a wealth manager, what does this mean? What kind of products does an advisor cover, and what is the degree of regulatory protection for clients? Thankfully, the role of a financial advisor is heavily regulated and may include many areas of finance such as:-

Tax advice

This can take in everything from capital gains to income tax and the efficient use of your tax allowances. Often tax advice is straightforward, but, when executed correctly your advisor can save you a lot of money.

Investment advice

Investment advice can take in anything from collective investments to pension funds and direct equity investment to private purchases. Many individuals can also use their financial advisor’s connections to expand and enhance their investment portfolios.

Estate planning

Retirement and pension funds will seem light years away when starting your employment career. However, there’s also the matter of estate planning, ensuring that your assets are left in as tax-efficient a manner as possible. Pensions and death are not two of the most popular topics across the breakfast table, but they are critical subjects.

Short, medium, and long-term financial planning

As we move through life, our situation changes, often impacting our short, medium, and long-term goals. Your financial advisor’s role is to discuss and formulate short, medium, and long-term financial plans/targets. Many people misunderstand the role of a financial advisor; they are there to absorb your thoughts, clarify what you are looking for, offer their input, and then try to formulate solutions. Sometimes you may need to take advice/guidance and trust your advisor; trust is critical.

One of the common misconceptions about financial advisors is that they are there to dictate what you should buy or sell and how you should allocate your assets. On the contrary, the role of a financial advisor is to advise; whether you take on the advice is up to you.

Keeping abreast of changes

Keeping abreast of tax changes is challenging for professionals, let alone individuals trying to self-manage their finances. Whether you are an employee, self-employed, or perhaps you own your own company, tax allowances and tax breaks change regularly. When it comes to visas for those working overseas, the situation can be even more complex. You may also be looking to repatriate assets and funds ahead of a return to your homeland – another area fraught with complications!

In many ways, you should see investment in a financial advisor as an investment in your future, not a cost. Any financial advisor worth their salt should be able to create short, medium, and long-term savings way above their charges. Very often, they will plant seeds today, which may not come to fruition until many years down the line, perhaps as you approach retirement. But unfortunately, these foundations and the forward-thinking approach of a sound financial advisor are often underestimated.

Adjusting your investments to your time of life

As we approach later life, you may experience significant changes in your financial circumstances. For example, perhaps your children have flown the nest, or you have downsized and taken a considerable gain on your property. Adjusting your financial targets as your situation changes and you move toward retirement is essential. This may involve liquidating certain assets, switching to less risky investments, and planning a reliable constant income in your later years.

The range is vast, from direct equity investment to government bonds, high-risk/potentially high-reward tech investments to traded options, insurance products, and Contracts for Difference (CFDs). Your financial advisor may often be required to rein in what can sometimes be a potentially dangerous attitude to risk. Ultimately, it will be the client’s decision, but what is the point of appointing a financial advisor if you don’t take their advice?

Your friend, not just your advisor

An experienced financial advisor is not just your go-to person for financial advice but can also become a trusted friend. Trying to balance professionalism and friendship can be challenging, but it can work as long as everybody knows their boundaries. In some cases, you may be able to socialise at formal business events or even sporting occasions. They may also be there to offer advice and guidance in difficult situations such as bereavement or divorce, a time when financial affairs are the last thing on your mind.

The often complex role of a financial advisor

As we have touched on above, there are many factors to consider when looking at the role and guidance offered by a financial advisor. Over time, many financial advisors will become friends, although there will always be a line between professionalism and friendship that cannot be overstepped.

You should expect your financial advisor to be proactive rather than reactive, monitoring and considering your short, medium, and long-term goals. Akin to servicing your car with no mechanical experience, many people try to self-manage their finances to save costs. Unfortunately, this can often cost you many times more than you would have paid in charges for advice.

Employing a financial advisor allows you to focus on your strengths, for example, family, business, and income going forward. The financial seeds planted by a proactive advisor today could save you a fortune in the future, something rarely considered in this short-term thinking world.

If you’re interested in discussing this article further or would like more information on financial advice, please get in touch.


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John Morris
John Morris
John Morris is a self-motivated person, a blogging enthusiast who loves to peek into the minds of innovative entrepreneurs. He's inspired by emerging tech & business trends and is dedicated to sharing his passion with readers.

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