What are Financial Advisors, and What Can They Do for Me?

Matt Sapaula

What is a Financial Advisor?

A Definition

In the most basic sense, financial advisors offer clients financial advice for compensation. This is keeping it simple, however. According to Investopedia, “Stockbrokers, insurance agents, tax preparers, investment managers,… financial planners,…estate planners, and bankers,” can all be considered financial advisors.


To be a financial advisor, however, one must possess a Series 65 license. This license secures that these advisors have a working knowledge of financial laws and regulations, how to handle practices ethically, and various topics that a financial advisor needs to know how to do to best serve clients. You want to make sure, also, that they have licenses from the Financial Industry Regulatory Authority and appropriate credentials and experience.

They’re Held to High Standards

Advisors are held to high standards. Their fiduciary responsibilities are bound to their clients and not their companies or themselves. Advisors must make sure they are acting on behalf of the client in such a way that benefits only the client’s true interests.

Two kinds of relationships have formed between advisors and clients since the Investment Adviser Act of 1940, which include:

  1. “the “arms length” relationship that characterizes the transactions between registered representatives and clients in the broker-dealer space, and
  2. “the fiduciary relationship that requires advisors registered with the Securities and Exchange Commission (SEC) as Registered Investment Advisors to exercise duties of loyalty, care and full disclosure in their interactions with clients”

What Can a Financial Advisor Do for Me?

Assess and Adjust Your Goals

Sometimes, goals can be unrealistic. If you are looking for a 13% return on your investments annually with little to no risk, you may cannibalize your investment. This is nearly impossible, and it is the job of your financial advisor to direct and plan out realistic objectives and goals for your portfolio.

Make Accurate Market Calls

When the subprime mortgage crisis of 2008 occurred, chaos ensued in America. Some advisors benefited from this recession, however. A man by the name of Michael Burry was one of those people. He made money from investment banks with credit default swaps. “‘As the pools of loans that are underneath these bonds [started] to default,’ Lewis [said], the investment banks that gambled on the subprime mortgage loans were forced to send Burry money daily as the bonds went bad.” By having an esteemed and successful financial advisor, you can avoid pitfalls and gain from depressing circumstances.

Make You Money

Financial advisors look at your portfolio and recommend the best plans of action for getting as hefty of an ROI as possible with the least amount of risk. They can look at your assets, liabilities, and equities and help you make the best calls on how to protect and make money off of each.

For more news, trends, and information on anything related to money, follow me on Twitter @MattSapaula–the Money Smart Guy!


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