In Financial Advisor, Wealth Management

The world is an uncertain place. Even in years prior to 2020, economists noted a variety of indicators that seemed to mark an increase in market uncertainty. And, of course, in recent days, the tangible reality of uncertainty has been driven home.

My point in noting uncertainty isn’t to cause alarm; it’s to point out the necessity of strategy. When outcomes are more fixed, guidance seems less necessary. When outcomes are less certain, guidance matters more.

Financial advisors exist to provide strategic guidance on considerations related to money. They can’t guarantee certainty (or investment returns), but they can help to implement strategies that will reduce the risk of missing financial goals. In today’s markets, the importance of this service is clearer than ever.

With all of that said and with the backdrop of current events in mind, let’s unpack what, exactly, a financial advisor does. As a Seattle financial advisor with over 30 years of experience in the industry, I recognize that the term “financial advisor” is fairly generic. To help you as you navigate uncertainty, I’d like to give clarity to what it means.

Let’s dig in.

The Definition of a Financial Advisor

As I’ve noted, most commonly, the term “financial advisor” refers to a professional who offers customers guidance on considerations related to money. This can be broken down further, though.

Investopedia elaborates on the services of financial advisors, noting that “Financial advisors, or advisers, can provide many different services, such as investment management, tax planning, and estate planning.”

It’s important to note that financial advisors must have certain certifications depending on the services they offer. It’s important to note that there are subtle distinctions around what financial advisers are not licensed to do. For instance, they can help with estate planning strategies, but can’t draft legal documents (only lawyers can do that). Financial advisers are knowledgeable in tax planning strategies, but only Certified Public Accountants (CPAs) are licensed to file taxes. For the purposes of this article, we’ll hone our focus toward investment advisers and wealth management advisers. These are some of the most common applications under the generalized term.

To this point, we’ve touched on the services of financial advisers briefly in reviewing the definition of the role. Now, let’s unpack the services further.

What Financial Advisors Do

At a general level, financial advisers can help you do three things: assess your current financial situation, create a plan to reach your financial goals, and help you carry out a plan via asset management. Often that includes recommending key vendors, such as accountants and lawyers.

Here’s what each of those activities looks like.

Most financial advisers start with an assessment.

The nature of the assessment will vary depending on your needs – for instance, if you’re considering an advisor to help analyze the risk of an investment portfolio, their assessment would likely not end there. Often an advisor will ask you to collect all of the financial information – real estate holdings, personal debt, college obligations, retirement savings – to better understand your situation.

After assessment, an advisor will help you to create a plan.

The contents of a financial plan will vary greatly depending on your goals and context, but it should always be purposed toward your personal objectives and goals. Common components of a financial plan include asset allocation strategies, budget creation, and risk profile adjustment.

In other words, your advisor will create a roadmap that helps you allocate your money intelligently.

Finally, financial advisers who are wealth managers also manage client portfolios.

This means that they will actively adjust your portfolio in an attempt to generate returns and manage risks in ways that align with your financial goals. They will buy and sell assets and securities on your behalf to support your objectives.

Note that all three components apply to any area of finance. You may have an adviser help you with insurance, retirement, real estate investment, or tax strategy. In each area, though, their general services are the same: assessment, planning, and management.

The Benefits of Financial Advisors

As I outlined at the top of the page, one of the primary benefits of a financial advisor is that they play a role in reducing the risk of missing financial goals.

To be clear (and compliant): working with a Seattle financial advisor will not guarantee that you hit your financial goals. It will not ensure that your portfolio grows at a certain rate or that you achieve specific results. What it does do is provide you with a strategic plan that is crafted to increase your probability of meeting your goals.

At a higher level, working with a Seattle financial advisor can also help you to select goals worth meeting. I have clients that enter engagements unsure of what they want to put their money toward; sometimes, working with a financial advisor can give them the freedom to define goals that they may otherwise have dismissed.

Finally, working with a financial advisor can improve portfolio results over time. A recent study, published by The Vanguard Group in 2016, found that by implementing wealth management techniques an investment adviser could add approximately 3.0% to annual returns over time. This is notable and can add up to real value.

Looking for Guidance from a Seattle Financial Advisor?

Hopefully, this review of what a financial advisor does can increase your clarity as you navigate financial decisions.

If you’re looking for additional guidance, I’d love to hear from you.

A career spanning 30 years of financial service experience has given me a deeper understanding of the risks and rewards of investing. If you’re ready to grow your assets with thoughtful investment advice, we may be a good fit.

Schedule a review of your portfolio today, and let’s take the first step toward figuring out what is best for you.

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