A financial advisor can help you make smart decisions that improve your financial security and overall financial position. These types of advisors can help you with important financial topics, such as budgeting and debt management.
Here you can read what a financial advisor is and how they can help you get your financial house in order.
What is a financial advisor?
A financial advisor helps individuals and families with core financial tasks and provides advice and information on how to improve their financial lives.
While other types of advisors may focus on broader financial areas such as wealth management or narrower areas such as estate planning, a financial advisor typically sticks to fundamental areas of personal finance.
An individual may call themselves a financial advisor without any certification, just as financial advisors can. This means that financial advisors can work in your interest, but can also be salespeople who want to sell you an expensive debt reduction plan, for example.
However, individuals can complete a program through the Association for Financial Counseling and Planning Education and obtain an Accredited Financial Advisor Certificate (AFC). Individuals must meet educational requirements, pass an exam and have 1,000 hours of related experience.
What does a financial advisor do?
A financial advisor typically helps individuals with the following financial tasks:
- Learning core financial literacy concepts such as money management
- Managing debts and paying off debts
-
Budget and stick to a spending plan
- Setting financial goals and making a financial plan
- Build good credit and improve your credit score
- Understanding the basics of investing and growing wealth
- Understand financial risks and how to limit them
- Develop good saving habits
- Understand the basics of tax reporting and credits
- Changing bad financial habits
Other, more specialized financial advisors can help clients navigate public assistance programs, including income support, debt management or housing programs.
In short, a financial advisor can help clients get all the fundamental financial elements in order to be successful. However, their scope typically excludes elements such as investing and wealth building, leaving these areas to a typical financial planner or wealth manager.
Many financial advisors charge an hourly rate or a flat fee for service. However, some are available for free from various public sources.
For example, the U.S. Department of Housing and Urban Development (HUD) partners with housing financial advisors across the country who provide free or low-cost advice on home buying, foreclosure avoidance, credit problems, and reverse mortgages. You can find a list of HUD-approved financial advisors in your area here HUD search function.
Financial Advisors vs. Financial Advisors
Financial advisors tend to focus on the “fundamentals” of good financial habits and practices, while financial advisors may focus on investment advice and wealth building.
Financial advisors tend to focus on the following areas:
- Retirement planningincluding how to effectively use retirement plans such as a 401(k) and IRA
- Investment managementincluding how to grow your wealth and choose the right investments
- Estate planningincluding how to pass on your assets and minimize taxes
- Goal planningincluding detailed financial plans to achieve your goals
Although these two types of professionals may perform largely different tasks, there is one area in which they often overlap: developing budgets and overall spending plans for their clients.
Those seeking the expertise of a financial advisor should use Bankrate’s financial advisor matching tool to find an expert in their field.
In short
If you need help paying off debt, creating a budget, or controlling your expenses, a financial advisor may be the right choice for you. And the good news is that you may be able to access financial advice for free if you work through the right organizations.
