What Does a Financial Advisor Do?
A financial advisor typically gives you ongoing advice on buying, selling and holding investments and monitors how they perform. Investor.gov describes the service this way.
Some advisers also give asset allocation advice or offer financial planning. If your money problem is debt, the Consumer Financial Protection Bureau (CFPB) describes a different professional: the nonprofit credit counselor, who helps with budgets, debts and debt management plans. No primary source we read defines what a financial coach does, so with a coach you ask what that specific person provides.
What a Financial Advisor Does for You
A financial advisor gives you ongoing investment advice and monitors how your investments perform, according to Investor.gov, which spells the title "adviser". The services Investor.gov lists for investment advisers are:
- Ongoing advice about buying, selling or holding investments.
- Monitoring of how your investments perform.
- Checks that your investments still match your overall investment objectives.
- Advice about market trends or asset allocation, which some advisers offer.
- Financial planning services, which some advisers offer.
Investor.gov presents the first three as what advisers typically provide and the last two as services an adviser "also may" offer. Ask each adviser which items on this list come with the account.
Brokers overlap with advisers on part of this work. Investor.gov's page on Form CRS (the customer relationship summary) says both brokers and advisers can give advice about buying investments, such as stock in a company or an index fund, and about whether to sell or hold afterward. Many firms are registered as both a broker and an adviser (dual registrants), and Investor.gov says a combination of advisory and brokerage accounts may be a good choice depending on your goals, preferences and needs.
Before a first meeting, write down which of the five services above you want. Then compare that list with what each advisor says it provides.
Financial Advisor Fees and How Advisors Get Paid
An investment adviser's fee is typically based on the value of all the assets held in your account with that adviser, according to Investor.gov. You may also pay other fees and costs for servicing the account and for the investments you buy, sell or hold. Investor.gov does not publish typical fee percentages on its Investment Advisers page, so ask each adviser for every fee and cost in writing.
Investor.gov says investment advisers are required to act in your best interest and not put their interest ahead of yours. The same page says the way advisers make money creates some conflicts with your interests, and those conflicts can affect the investment advice you receive. Our guide to what a fiduciary is covers that best-interest duty on its own.
A relationship summary shows what a pay disclosure looks like on paper. One firm's Form CRS answers the question "How do your financial professionals make money?" by saying it pays its financial professionals in different ways, including commissions and advisory fees. The same firm says higher commissions, costs or fees could lead to higher pay for a financial professional, which is the kind of conflict Investor.gov tells you to ask about.
Advisor, Credit Counselor and Coach Roles Compared
A financial advisor, a nonprofit credit counselor and a financial coach do different jobs, and Investor.gov and the CFPB describe only the first two.
| Role | What the sources say | Who it fits | What to ask |
|---|---|---|---|
| Investment adviser | Ongoing advice on buying, selling or holding investments, plus monitoring. Some add asset allocation advice or financial planning (Investor.gov) | Someone who wants help with investments over time | How is your fee calculated, which services are included, and what conflicts do you have? |
| Nonprofit credit counselor | Advice on money and debts, budget help, debt management plans and money management workshops. Counselors certified and trained in consumer credit, debt management and budgeting (CFPB) | Someone whose main problem is debt or a budget | What does each service cost, in writing, and how are your employees paid? |
| Financial coach | No primary source we read defines the job. Coach titles appear in a credentials database covered below | Not described by any source we read | What exactly do you provide, what does it cost, and what registration or designation do you hold? |
Under a debt management plan, the CFPB says, you make a single payment to the credit counseling organization each month or pay period, and the organization pays each of your creditors. The CFPB says such a plan typically lowers monthly payments, interest charges and fees. The National Foundation for Credit Counseling (NFCC) describes credit counseling that starts with a confidential consultation and a personalized action plan. It lists more than 1,500 NFCC certified credit counselors.
Coach and counselor titles appear in the Financial Industry Regulatory Authority (FINRA) professional designations database. Examples are Certified Financial and Career Coach (CFCC), Certified Workplace Money Coach (CWMC), Certified Professional Retirement Coach (CPRC), Accredited Financial Counselor (AFC) and Certified Financial Counselor (CFC). FINRA says it does not approve or endorse any professional credential or designation, so a listing in that database is not a FINRA endorsement of the title.
Investor.gov warns that initials after a broker's or adviser's name do not make that person more qualified than another, and they do not necessarily mean better service for you. Some initials may mean the person can sell only certain products, and the FINRA list shows that some credentials are easy to obtain while others are hard-earned. If you are weighing an advisor against a planner, our financial advisor vs financial planner comparison covers that pair.
How to Check Who You Are Talking To
Investor.gov says the most important question before you hire an investment professional is whether that person is registered with the Securities and Exchange Commission (SEC) or with a state securities regulator. Its Working with an Investment Professional page calls it "really risky" to invest with someone who isn't licensed. The same page points to a free search tool. It shows whether a professional is licensed and registered.
Registered broker-dealers and registered investment advisers are required to give retail investors a Form CRS. Investor.gov says each one covers:
- The types of services the firm offers.
- The fees and costs you will pay.
- Conflicts of interest a broker or adviser may have.
- The required standard of conduct for the services.
- Whether the firm and its financial professionals have reportable legal or disciplinary history.
- Conversation starters, which are questions to ask.
These summaries use similar headings in a similar order, so you can set two firms' summaries side by side and compare them topic by topic. Investor.gov's checklist for selecting an adviser adds questions of your own: what services and products you need, any limits on what the adviser can provide, and, if there is legal or disciplinary history, what type of conduct it involved. Our guide on how to choose a financial advisor covers that selection process.
Credit counselors come with a different checklist from the CFPB. The CFPB says a reputable organization should send free information without asking for details about your situation, and if it will not, you should go elsewhere. It also tells you to:
- Get a specific price quote in writing.
- Read anything before you sign it.
- Avoid any organization that pushes a debt management plan as your only option before it analyzes your situation.
- Ask whether the counselor is accredited or certified, what training the counselor has, and how employees are paid.
The CFPB's credit counseling page also names your state attorney general and state consumer protection agency as places to check on an organization.
Who a Financial Advisor Is Not For and What Would Change the Answer
Our read is that an advisor is the wrong first call if your main problem is debt or a budget. The CFPB describes nonprofit credit counselors as the people who advise on money and debts, help with budgets, develop debt management plans and offer money management workshops. Investor.gov describes the typical adviser relationship as ongoing advice paid through a fee based on your account assets, so ask any advisor you contact whether it offers anything shorter and what that costs, in writing. If the question is whether the ongoing fee pays for itself, our guide on whether a financial advisor is worth it handles that decision.
Our answer would change if the rules behind it changed. Everything above about advisers rests on Investor.gov's description of a best-interest duty, fees typically tied to assets and the Form CRS requirement, so a change to adviser registration or disclosure rules would change what you can expect. For coaches, our answer would change if a primary source published a definition of the job, and until one does, the description of a coach's work to rely on is the one that coach gives you in writing.
Our Takeaway
A financial advisor typically gives and monitors investment advice for a fee usually tied to the assets in your account, and some advisers add asset allocation advice or financial planning. A nonprofit credit counselor helps with budgets, debts and debt management plans, and for a financial coach you ask what exactly that person provides.
If your need is debt help, the CFPB describes nonprofit credit counselors who help with budgets and debts. Write down the job you need done, then ask each candidate, in writing, which services they provide and how they are paid.
Frequently asked questions
What does a financial advisor do for you?
A financial advisor typically gives you ongoing advice about buying, selling or holding investments, according to Investor.gov. The adviser also monitors how those investments perform against your overall objectives. Some advisers also give advice on market trends or asset allocation, or offer financial planning services. The fee is typically based on the value of the assets in your account with that adviser.
What should a financial advisor do for me?
A financial advisor should act in your best interest and not put their interest ahead of yours, which Investor.gov says investment advisers are required to do. Beyond that duty, services vary by adviser. Investor.gov suggests comparing what you need with what the adviser provides, any limits, what you will pay, how the adviser gets paid and what conflicts the adviser has. The adviser's Form CRS lists services, fees, conflicts and any reportable legal or disciplinary history in a standard order.
Is credit counseling free?
Credit counseling is not always free. The CFPB says most credit counseling organizations are non-profits, yet credit counselors may charge fees for some of their services. A reputable organization should send you free information without asking for details about your situation, and you should get a specific price quote in writing before you sign anything.
Do I need a financial advisor?
It depends on whether you want ongoing advice about buying, selling and holding investments, which Investor.gov says an adviser typically provides for a fee based on the value of the assets in your account. Our guide on whether a financial advisor is worth it weighs that cost against the value.
Sources
We prioritize primary sources for rules, formulas, rates, limits, and definitions. See our calculator methodology and editorial policy.