What Is a Financial Advisor?

A qualified financial advisor is trained to analyze your personal financial situation and prepare a program designed to help you meet your financial goals and objectives. It might be helpful to think of your financial advisor as a kind of doctor for your financial health.

Financial advisors (also called financial planners or financial consultants) can earn certifications or designations by completing accredited courses of study. Two of the most common are the Certified Financial Planner (CFP) certification, which is awarded by the Institute of Certified Financial Planners, and the Chartered Financial Consultant (ChFC) designation, which is awarded by the American College of Bryn Mawr. There is also the Registered Financial Planner, which is a designation awarded by the International Association of Registered Financial Planners.

Financial advisors are often trained as accountants, lawyers, insurance agents, or stockbrokers — all professions that have a relationship to different aspects of your financial well-being. Because of this association with another profession, a financial advisor frequently will specialize in a specific type of financial planning, such as retirement planning or estate and trust planning. Financial advisors are usually compensated in one of three ways. They may:

• charge a fee for their time and service, but sell nothing;
• give free advice, but charge a commission on transactions involving investment products such as mutual funds, stocks, bonds, and insurance products; or
• charge both a fee and commission on transactions.

Although all three methods of compensating financial advisors are popular, some people prefer to simply pay a financial advisor for services provided, in much the same way you would pay an accountant or a lawyer for advice.

© LPL Financial, created by Standard & Poors

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.


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