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Wikipedia About Financial Advisors
Expand: date=January 2007
A financial adviser is a professional who renders investment advice and financial planning services to individuals and businesses. Ideally, the financial advisor helps the client maintain the desired balance of investment income, capital gains, and acceptable level of risk by using proper asset allocation. Financial advisers use stocks, bonds, mutual funds, REITS, options, futures, notes and insurance products to meet the needs of their clients. Many financial advisers receive a commission payment for the various financial products that they broker, although "fee-based" planning is becoming increasingly popular in the financial services industry.
A further distinction should be made between "fee-based", i.e., they charge fees and collect commissions, and "fee-only" advisers. Fee-only advisors receive 100% of their compensation directly from their clients and have no conflicts between their own interests and those of clients created by commissions or referral fees paid by other product or service providers.
Goals
The main goal of a financial advisor/planner is to develop relationships with clients in order to reach their dreams/goals of their future financially and to maintain and service that relationship. In order to ensure ethical practices, financial advisers must understand a client's financial situation as well as their need for financial stability. Clients should understand that advisers/planners cannot help all clients, but it is imperative to have a financial professional take a look at your financial position to see if your financial goals can be achieved. Finance can be complicated and any adviser/planner has responsibilities ethically to see that your risk is minimized and monetarily your money is maximized.
Retirement
One of the major services that financial advisers offer is retirement planning. The financial adviser will typically have great knowledge in the areas of budgeting, forecasting, taxation, asset allocation and financial tools and products in order to establish realistic goals and the strategy by which to reach them. In the United States, this will include the use of several investment tools such as 401(K)/403(B) Roth account(s), Individual Retirement Accounts/Roth IRAs, mutual funds, stocks, bonds and CDs.
The financial adviser will determine what percentage of the available income is necessary--when taking into account the tax liabilities, expected inflation and projected return on investment--in order to meet a minimum balance by the client's target age of retirement. This is a fairly straightforward calculation, and there exist many automated tools that do this. The financial adviser's greatest contribution will be that of asset allocation: determining how to maximize the return on investment while satisfying the client's risk tolerance.
