What Does a Financial Advisor Do and When to Hire One?

Money is tricky, and managing it is even trickier. As leadership expert John C. Maxwell once said, “A budget is telling your money where to go instead of wondering where it went.” Simply put, that’s the kind of clarity a good financial advisor can bring to your life.

When most people hear the term “financial advisor,” they instantly think of someone who manages stock portfolios for millionaires. 

But the truth is, a good financial advisor is much more than that. They can be valuable at each and every stage of your financial journey, no matter your income level.

From helping you plan for retirement to managing debt or even saving for your child’s education, a financial advisor acts as your personal guide to navigating your life’s major money decisions.

But what exactly do they do? Can we really trust them with our hard-earned cash? And how do we know if we need one, anyway? Let’s get specific.

What Financial Advisors Actually Do

A financial advisor is a trained and paid professional who assists you in managing your finances, making financial decisions, and planning for future goals.

Whatever you’re saving for, whether for your pension, your first home, or even managing debt, a financial advisor can assist with a customized road map. From investing and budgeting to retirement and tax planning, they can assist you in making sense of your whole financial life.

An expert financial advisor can suggest a tailored financial strategy that perfectly fits by working closely with you to learn your goals, principles, and lifestyle. They can even guide you on how much to save for retirement, where to invest based on your goals, and how to reduce your tax bill. If you’re dealing with debt, they’ll help you make a plan to pay it down.

They also help you check whether you have the right insurance and help you plan what happens to your money later in life. Whether you’re getting married, switching careers, or starting a family, they make sure your finances keep up with the changes.

A good advisor nowadays is more like a therapist, they won’t give you a spreadsheet. Instead, they’ll listen, they’ll understand, and they’ll guide you through your financial journey.

When You Should Consider Hiring a Financial Advisor

You don’t have to be rich to have financial guidance. In fact, the best time to get a financial advisor has less to do with your bank account and more to do with the complexity of life.

You might actually need an advisor if your money isn’t growing. If your savings are idle or you don’t know where to invest, an advisor can assist you in building an ideal financial strategy that suits your goals and risk tolerance.

You’ve undergone significant life changes, like getting married, having children, or switching careers, which usually call for new financial plans.

Or perhaps your investments are not doing their job. If your portfolio is underwhelming or you’re making emotionally driven choices with your money, an objective advisor can help you get back on track.

Maybe you’re dealing with complex financial situations. It means that if you have various sources of income, investments, or assets, an advisor can assist you with managing them properly.​

Financial advisors often assist clients with real estate financing strategies as part of long-term wealth planning, an area that often requires expert guidance on loans, investments, and tax implications.

If you’re struggling with a lack of financial knowledge and you’re confused about financial concepts or strategies, an advisor can explain and educate you on how to manage it accurately.

And if you’re someone with time constraints, because working with finances requires time, an advisor can do the brunt of the work.

Services Provided by a Financial Advisor

A best financial advisor provides so much more than just a piece of investment advice. Their work goes far beyond that and it’s all meant to benefit your financial health in every possible way.

Portfolio Management: They’ll assist you in building a smart investment plan that meets your goals while adapting to market changes and life events. 

Debt Management: Walking you through plans to pay off and eliminate debts such as student loans, credit cards, or mortgages, and confidently move forward.

Budgeting: A financial planner will assist you in knowing where your money’s going and develop a long-term spending plan that really works for both your immediate needs and long-term aspirations.

College Savings: Preparing you for education expenses without keeping other financial goals at bay.

Long-Term Care Planning: Your advisor can assist you in planning for future healthcare expenses so that you’re not stuck later in life. 

Estate Planning: Helping you plan your estate, wills, and charitable donations to match your desires and values.

Tax Efficiency: Although they may not prepare your returns, a financial advisor typically works closely with tax experts to ensure you’re keeping more of your hard-earned money through smart, tax-efficient strategies.

Can You Trust a Financial Advisor?

Let’s be honest, handing over your money to someone is a big deal. A financial advisor gets access to personal information regarding your finances and assists in making life-changing decisions. So, trust is a completely necessary one.

Although the vast majority of financial advisors are reputable and well-trained, it’s still a good idea to do a bit of homework first. Here’s how you can ensure that you’re with someone who really has your best interest in mind:

Verify Their Credentials: Designations such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) aren’t just fancy letters, but they indicate that the advisor has high professional standards.

Ask About Their Fiduciary Duty: Certain advisors are legally required to place your interests above their own. They are fiduciary advisors. Always ask, “Do you operate under a fiduciary standard?”.

Get to Know How They Get Paid: Advisors make money in various ways, some have a flat fee, while others receive commissions for products they sell. 

Speak to Their Clients: Ask for referrals. A good advisor will be willing to introduce you to a couple of existing or former clients who can give you their insights.

Run a Background Check: Search them on official websites whether they’ve ever had complaints or disciplinary actions taken against them.

When do you need a Financial Planner? Here’s the Complete Guide to Finding One.

Takeaway

Choosing a financial advisor is not just merely a matter of hiring someone who knows numbers,  it is finding someone who actually cares about your goals,  listens to your concerns, and assists you in making wise decisions with your finances through sound financial advice. 

Take the time to ask questions, understand how your advisor works, and make sure you feel confident with the relationship. A professional and qualified financial advisor can be a lifelong partner in helping you build a secure and prosperous future.

And so, if you’ve been wondering whether you need a financial advisor or if you can ever really trust one, the short and simple answer is yes, as long as you choose wisely.

If you’re looking for personalized financial advice tailored to your goals, our financial advisory services in Luxembourg are here to help. You can schedule a consultation with our team to get started.

If you are wondering how financial advisors differ from financial planners, have a look at our detailed comparison here.