What is a financial adviser and what do they do?

Financial advisers are certified professionals that provide advice and guidance in managing your finances. They can help you meet your investment goals, give you a sense of the kinds of investments that make the most sense for you, help you file your taxes, guide you through estate planning or simply saving for retirement. They can help you maximise your savings and reduce your debts.

Moneyfarm offers investment support on the phone, in person, or via chat. Their advisors can help with retirement planning, market insight and account support. Our proven investment strategy keeps the investment costs low, using tactical adjustments to make the most of opportunities.

Financial advisor definition

By definition, a financial advisor is a professional that provides guidance and advice on the management of your finances in exchange for compensation. The types of services and areas of expertise financial advisors (or financial advisers) are becoming increasingly differentiated, from investment management, tax filing and estate planning. 

There are different kinds of financial advisors for the different kinds of services you might need. Traditional advisors typically offer personalised financial planning and advice, for a commission of the assets managed. Robo-advisors are a much lower-cost alternative to a traditional financial advisor. They usually require you to answer a range of questions about your financial situation and risk tolerance which they will use to dictate your financial strategy. The lower fees and lower minimum deposits are made possible as the transactions don’t rely on human time. Online advisors – these often rely largely on Robo-advisors but combine them with human advice.

What does a financial advisor do?

Financial advisors are able to support you in a range of different activities, based on your specific needs and financial situation. They can serve as investment managers, helping you to choose the investments that are best suited to your investment profile; they can serve as financial planners, helping you to reach the financial goals that you set for yourself, finding ways to set aside money for retirement or toward estate planning; they act as tax consultants, helping you to maximise the returns that you receive for your assets.

They assess your financial situation and goals in order to gain an understanding of your profile and develop a plan to help you achieve those goals, but the role of the financial advisor is also that of the educator. 

Part of the job of the financial advisor is to help you get a better view of what exactly is entailed in reaching the financial goals you’ve set for yourself. To that end, financial advisors may need to educate you on key topics in personal finance, like how to budget expenses and save money, before moving on to more complex issues like investing and insurance.

Independent financial adviser

What is an independent financial advisor? Financial advisors can work independently through their own practises or they may work for a larger financial firm. In either case, they are extended fiduciary capacity and obliged to work in the best interests of their clients when managing their finances.

Advice vs guidance

While the difference may seem subtle, there are some important differences between financial advice and financial. In the UK, financial advice is a service that is regulated by the Financial Conduct Authority (FCA), provided by trained and certified experts in exchange for compensation who often play a key role in its implementation.

Moneyfarm provides digital financial advice, carefully matching investors to an investment profile so they are on the plan that suits them the best. This advice continues to run for as long as they invest with Moneyfarm and their investment portfolio(s) will reflect this. In addition, Moneyfarm also provides discretionary management solutions, where the investment portfolios are fully-managed and carefully researched by professional experts who keep a constant eye on your progress. 

Financial guidance, on the other hand, is oftentimes aimed at raising awareness and knowledge of financial issues, for free or at discounted rates, to complement your own personal research. As such, financial guidance usually offers an overview of the possibilities that may be pursued, without strongly indicating one option over another. Since the guidance is free, and not provided with the intention of helping you decide specifics, the decisions you make as a result are your own responsibility and are not subject to the protections of the FCA.

Do you need a financial adviser?

No matter what phase of life you are in, or what your financial situation may be, working with a financial advisor can help you along toward your financial goals. Seeking out the help of a professional to help you with your personal finances takes the stress and confusion out of managing your finances. Though, for information on things like ISAs and savings accounts, financial guidance may be more appropriate.

Even if you don’t feel overwhelmed managing your finances, and you aren’t struggling financially, working with a financial advisor can help keep you on the right track to meet your goals, suggesting improvements or proposing new options to help you get to where you want to be financially. In fact, financial advisers are most useful for medium-to-long-term financial planning. For more complicated financial products like private pensions, a financial adviser may come in more useful than for simpler products.Whether it’s coming up with a tailored investment plan or finding more efficient ways to set money for retirement, you might just need a seasoned and certified professional to help you accomplish your goals.  When investing large sums of money, a financial adviser can provide peace of mind that you are making the right decision, as well as FCA protection in some instances.

The Costs of a Financial Advisor

The fees for financial advice will largely depend on the type of services for which you enlist their help. As for financial guidance, as previously stated, this type of product is typically provided for free or at more convenient and accessible prices. 

While some financial advisors may charge a flat fee for their services, it isn’t uncommon for advisors to charge a percentage commission of the assets under management, on average between 1% and 3%. However, oftentimes financial advisors structure the fees that they charge so as to decrease as you do more business with them.