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Do I Need a Financial Advisor? The 3 Main Types & How They Can Help You

CEO Khai Intela
A financial advisor may seem like a luxury reserved for the wealthy, but the truth is, anyone can benefit from their expertise. Whether you're just starting your investment journey or have been investing for years,...

A financial advisor may seem like a luxury reserved for the wealthy, but the truth is, anyone can benefit from their expertise. Whether you're just starting your investment journey or have been investing for years, a financial advisor can be a valuable resource. So, you might be wondering, "Do I need a financial advisor?" Let's explore the main types of financial advisors and the services they provide.

What Does a Financial Advisor Do?

Financial advisors play a crucial role in helping you manage your money effectively. They start by understanding your financial goals and then create a personalized plan to help you achieve them. It's important to note that "financial advisor" is a broad term, and there are different types of advisors specializing in various areas of finance.

Contrary to popular belief, a good financial advisor will not provide generic advice like "spend less money" or "save more." Instead, they will consider your unique financial situation, including your income, assets, expenses, and goals, to create a plan that fits your needs and lifestyle.

Here are a few goals that a financial advisor can help you reach:

  1. Developing a passive income
  2. Managing your investments
  3. Planning for taxes
  4. Saving for retirement
  5. Creating a rainy day fund

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1. Developing a Passive Income

Many investors aim to create a passive income stream, which is money earned without daily labor. A financial advisor can help you choose the right path to build a passive income that provides supplemental earnings and a steady source of income.

Investing in corporate stocks, government bonds, index funds, or real estate are popular ways to generate passive income. A financial advisor can guide you in selecting the best investment options based on your budget and goals.

2. Managing Your Investments

Investment management is another crucial aspect where financial advisors can assist. They help you find suitable stocks or bonds based on your investment goals, budget, and risk tolerance. Diversifying your investment portfolio is essential to protect against market fluctuations and maximize earnings.

Additionally, investment managers can advise you on reinvesting your stock earnings strategically, ensuring consistent wealth growth. If you have real estate investments, they can help maximize profitability by optimizing property management and navigating market fluctuations.

3. Planning for Taxes

Filing taxes can be overwhelming, especially for investors. A financial advisor can provide valuable tax guidance to help you minimize your tax liability. They can help you strategically time your investments and major financial transactions to optimize your tax savings.

4. Saving for Retirement

Building a substantial retirement fund is a common investment goal. A financial advisor can help you create a retirement plan that suits your budget, including contributing to retirement accounts like 401(k)s or IRAs. They can also recommend investments, such as index funds, to boost your retirement savings.

5. Creating a Rainy Day Fund

Having a rainy day fund is crucial for financial security. Unfortunately, most Americans don't have one or have insufficient funds set aside. A financial advisor can help you calculate how much you need to contribute to build a strong rainy day fund based on your income, expenses, and family size. They can also suggest the best type of account for your funds and create a contribution strategy that aligns with your short-term budget.

Financial Advisor Vs. Financial Planning

It's essential to understand the distinction between a financial advisor and financial planning. While these terms are sometimes used interchangeably, they have distinct meanings. Financial advisors encompass a broader range of financial management services, including financial planning. On the other hand, financial planning focuses specifically on one-on-one financial guidance that covers all aspects of your financial health, not just investment goals.

When Do I Need a Financial Advisor?

Instead of asking, "Do I need a financial advisor?" a better question would be, "Am I in a situation that warrants expert financial advice?" Here are some common investment and life situations where seeking financial advice is beneficial:

  • Having difficulty managing money
  • Experienced major life changes
  • Feeling overwhelmed by financial stressors
  • Considering opening a business

1. Having Difficulty Managing Money

If you're struggling to manage your finances effectively, you're not alone. Seeking guidance from a financial advisor can help you evaluate your overall financial health, especially if you have various assets or investments. They can help you identify which assets are profitable, which ones to let go of, and how to maximize the value of the assets you want to keep.

2. Major Life Changes

Life events like marriage or having children often prompt individuals to seek financial advice. Combining finances with a spouse or preparing for the expenses of raising children can be challenging. A financial advisor can help you navigate these changes and create a new financial plan that ensures your financial success as a couple or as a family. They can guide you in creating a college fund, finding suitable life insurance, and more.

3. Overwhelmed by Financial Stressors

Financial stressors can weigh heavily on us, making it difficult to manage expenses and plan for the future. Seeking advice from a financial advisor can help you prioritize debt, create a budget, and develop passive income strategies. Moreover, they can recommend government programs that provide financial support or tax relief.

4. Opening a Business

If you're planning to start a business, consulting a financial advisor is highly recommended. They can help you create a financial plan that outlines how you intend to turn a profit. Additionally, they can guide you in developing a contingency plan in case your business faces challenges. As you operate your business, a financial advisor can provide insights on ongoing expenses, improve overall efficiency, and identify new investment opportunities.

The 3 Types of Financial Advisors

Financial advisors come in different types to cater to diverse investor needs. The three main types of financial advisors are:

  1. Traditional financial advisors
  2. Robo-advisors
  3. Online financial planning services

Traditional Financial Advisors

Traditional financial advisors offer in-person consultations and expertise in various areas of finance. Some common types of traditional financial advisors include Certified Financial Planners (CFP), brokers/stockbrokers, wealth managers, and registered investment advisors (RIA).


Robo-advisors provide low-cost financial advice using algorithms. They typically have you fill out a questionnaire to determine your investment goals and risk tolerance. Based on your answers, the robo-advisor will recommend a suitable financial plan or investment portfolio, often including low-cost ETFs and index funds. Some robo-advisors can even automatically manage your investments, including dividend reinvestment.

Online Financial Planning Services

Online financial planning services offer similar services as traditional financial advisors but through virtual platforms like video conferencing or online chats. They provide convenient, lower-cost options while delivering quality guidance.

When selecting a financial advisor, consider factors such as cost, experience, your investment goals, and whether you prefer a long-term relationship or require guidance on specific financial decisions.

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How Much Do Financial Advisors Cost?

The cost of financial advisors varies, making it important to compare rates online and in your local area. Here's a general idea of the costs associated with different types of financial advisors:

  • Robo-advisors: Typically charge a 0.25% fee on your annual account balance.
  • Online financial planning services: Charge an annual flat fee or hourly fees for virtual consultations. They may also charge a higher fee on investment transactions, usually between 0.30% and 0.89%.
  • Traditional financial advisors: Charge either a flat fee or an hourly fee. Some may require a minimum account balance, while others accept clients from all income brackets.

Do I Need a One-Time Financial Advisor?

There are situations where seeking one-time financial advice can be beneficial. For example, if you have employee stock options and need help deciding the best course of action, a financial advisor can guide you through the process. One-time consultations can provide valuable insights when making significant financial decisions.

Do I Need a Full-Time Financial Advisor?

As your financial situation becomes more complex, you may prefer to work with a full-time financial advisor. They can help manage multiple investment types, business ownership, and properties. Full-time advisors offer guidance on asset management, tax-forward investment strategies, and long-term financial planning. Typically, clients meet with their financial advisors once or twice a quarter, depending on the advisor's recommendation.

Can I Trust Financial Advisors?

It's essential to trust your financial advisor since they play a significant role in managing your money. Look for certifications like those from the U.S. SEC or CFP Board, which ensure that the financial advisor meets educational and ethical standards.

Always research a financial advisor's qualifications before working with them. Websites like BrokerCheck can provide information about a financial advisor's credentials. Watch out for red flags like unresponsiveness, unclear planning, or bad investment advice.


A financial advisor can be an invaluable resource for investors looking to boost profits, manage investments effectively, and navigate major life changes. By understanding the different types of financial advisors and the services they provide, you can determine if you need their expertise.

Remember to consider your investment goals, budget, and preferred level of interaction when choosing a financial advisor. And most importantly, always verify the credibility and qualifications of any financial advisor you work with.

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Note: This article is for informational purposes only and should not be considered financial advice.