Services Offered by a Financial Advisor

6 Essential Services That Financial Advisors Offer


6 Essential Services That Financial Advisors Offer



What exactly do financial advisors do? The short answer is: a lot. When you break down the meanings of the words “financial” and “advisor,” you begin to see why. Financial advisors are (in the ideal world) professionals capable of offering advisory help on financial matters.

Simple, right? Matters get a tad more complex when you dig into the specifics of their services.

We want to help you understand six specific services of financial advisors. Put differently, we want to help you understand what a financial advisor is
actually doing when they’re “advising.” Here are the services we’ll explore:

  1. Lifestyle Planning
  2. Investment and Savings
  3. Retirement Planning
  4. Inheritance
  5. Insurance
  6. Taxes
To keep this simple, we’ll go service by service and say a bit about what each service typically consists of. As we move along, it’s crucial to keep in mind the goal of a financial advisor: to present a holistic view of your life goals, the lifestyle you want to have. Think of each service as an explanation of how an advisor would accomplish this goal.

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1. Lifestyle Planning: Family, Occupation and Recreation
Core to the services of financial advisors is understanding who their client is. Doing this enables them to help their client plan their lives and set goals. Most advisors try to focus on three specific areas of one’s lifestyle: family, occupation and recreation. Financial advisors help their clients optimize their finances for each of these categories. How? By clarifying the client’s goals, and then assisting them in reaching them.

Creating a financial plan and setting goals is the first step in learning how much money you’d actually need to live your desired life. Most plans begin with a focus on your family—what are you aiming for as it related to your family? The next step involves assessing the client’s occupation, income, etc. In many cases, this information will guide much of the goal-setting. Lastly, by getting clear about what kind of recreation is important for the client, the financial advisor can identify a realistic strategy for achieving the financial plan.

As you can imagine, there’s a lot of trust required by the client for this step in the process. Governed by the Financial Industry Regulatory Authority, financial advisors (often times fiduciaries) are expected to
always prioritize the interests of their client. So, you can rest assured knowing your financial advisor has a legal and ethical responsibility to protect what’s yours. This is true whether they’re acting on your behalf or simply managing your portfolio alongside you.
A second service offered by financial advisors in the interest of one’s lifestyle is investment and savings.
2. Investment and Savings
Assisting with investment and savings is one of the more commonly known services offered by financial advisors. This service, however, can take many different forms.

When it comes to assisting clients with their investment and savings strategy, there are several different approaches. As it relates to one’s investment portfolio, the two dominant approaches divide up between
active and passive management.

The service of actively managing someone’s portfolio looks like regular buying, selling and adjusting of securities. Passive management may look like advising you on good long term investments through buying financial assets and letting it ride.. Portfolios are often comprised of stocks, bonds, mutual funds and ETF’s (exchanged-traded funds), all of which are being managed by your financial advisor.

Investment and savings help doesn’t necessarily mean
managing your portfolios, however. It might instead simply be consulting you on your strategy. You may be the type that prefers to hold more of the control (no judgment). So for you, they may be offering tips and tricks, so to speak, for everything from your 401k to your 529.

The driving motivation for financial advisors offering this service it to maximize their client’s return on investment. This includes seeking to reduce your risk with your investment options in such a way that, once again, prioritizes your ultimate lifestyle goals—the heart of your financial advisor’s duty.
3. Retirement Planning
Retirement planning can be a daunting task. Not only does it force us all to confront our mortality afresh; it’s also just complex.

The complexity arises, in large part, from trying to determine how much you need in order to retire in your preferred way. Moreover, you’ll need to consider Long Term Care—personal and medical care services for those incapable of caring for themselves—as well as health care costs. These are both costs which experience annual increases. At the moment, the national average of these costs is $4k/month or $5k-$8k/month in states like California.

Answering the following questions would inevitably be part of the process:

  • How much money do I need each month, each year of my retirement?
  • What will be the total of my monthly/annual expenses?
  • What will be the structure of my social security benefits?
  • How should I engage medicare planning?
  • Do you want to travel? If so, how often and how luxuriously?
  • How will inflation rates impact what I need each month to live my ideal retirement?
  • Do I need to keep investing when I’m retired?
  • How much will my kids be left after my retirement ends? (Morbid, we know.)
Retirement planning is about understanding what an ideal retirement would look like for you, while also incorporating a plan for contingent costs like those referenced above. A good financial advisor who’s working on your retirement plan will help you optimize your savings so that you may experience your retirement with as few surprises and little risk as possible.
4. Inheritance and Estate Strategies
Inheritance and estate strategies can feel quite intimidating. In fact, it often feels like this is something for the rich and is very complex. In reality, it can be very simple, and everyone needs it. In their simplest form, inheritance and estate strategies are designed to help you set up a plan for your assets that takes effect once you pass.

First, a word about inheritances and estates. An inheritance refers to a portion of a person’s assets received by a specified beneficiary. Often times, this is some person in the family who receives money and/or property upon the death of another family member. An estate, on the other hand, refers to the sum total of assets of a given person prior to and at the point of their death (i.e. the sum value of their money, property and any other assets).

To plan your estate, then, is to decide how your assets will be divided and distributed upon your death. A central feature of this process is assessing the tax implications for your estate on you/your inheritors. This highlights the importance of the financial advisor because they can help minimize the tax implication. This also means being proactive with clients to distribute the money while they’re still alive.

The components used to plan your estate usually include a will and living will, setting up power of attorney for health and finances, and setting up a trust. Financial advisors help guide your choices about asset distributions and decisions with tax-implications (more on taxes to come). These are the main functions of their service for inheritance and estate strategizing.

Remember, estate planning (like all financial advising services) is not only for the rich. While it may feel daunting, the implications of not planning your estate can be devastating. Whether you’re 25, mid-life with kids, or 90 years old, what you have will go to someone. Estate planning ensures that you get to make that decision.
5. Insurance
You might be surprised to see insurance on the list of financial advisory services. When it comes to the different types of insurance financial advisors offer, the list is fairly diverse.

In general, financial advisors offering insurance as their service are interested specifically in
life insurance. There are several different kinds of policies you can expect to hear about:

  1. Whole Life Insurance
  2. Universal Life Insurance
  3. Variable Life Insurance
  4. Term Life Insurance
  5. Index Life Insurance
Each of these kinds of life insurances has their own unique differences, ranging from length of policy to conditions guiding payouts to beneficiaries. Additionally, some of these forms of insurance include savings options. The job of the financial advisor offering life insurance as a service is to guide you through the nuances of the different policies with the aim of helping you choose the best policy.

The reason selling insurance is a service of financial advisors is because being insured is a way of protecting your assets, lowering your overall expenses, and setting up contingency plans for your finances in the interest of any beneficiaries you may have.
6. Taxes
Handling your taxes is another risk management-based service of financial advisors. There’s no question about it: taxes are complicated. New rules come out each year; old rules we thought were never going to change are constantly revised. Keeping up with tax policy changes is a full-time job in and of itself.
As it turns out, only 1 in 10 advisors actually offer filing taxes as a service (think mostly of CPAs). Tax guidance, however, is something more advisors will offer. The central goal of a financial advisor offering tax services is to improve your tax efficiency.

Tax efficiency is about organizing your assets (including your investment portfolio), your income and your distributions in such a way as to reduce your
tax liability—what you’ll owe or could lose in taxes year to year. It may look like making your investment portfolio more tax-advantaged. Perhaps it’ll look like “Tax Loss Harvesting”—a process of buying/selling stocks to offset your tax burden.

Recall that the ultimate goal of your financial advisor is to help you achieve the lifestyle you wish to have. They do this through seeking to improve your overall financial health and increase your financial efficiency. All of the services discussed up to this point are in service of you reaching your ultimate goals.

So, are you ready get in touch with a financial advisor about your specific needs? Reach out to us
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