Personal Financial Advisor

Written By:
Paul Tracy
Updated September 30, 2020

What is a Personal Financial Advisor?

A personal financial advisor (also spelled personal financial adviser) is an educated investment professional who helps people set and meet long-term financial goals.

How Does a Personal Financial Advisor Work?

A personal financial advisor is similar to an investment advisor, financial planner, investment manager or investment consultant.

A personal financial advisor analyzes a client's current financial status and helps the client set reasonable, achievable financial goals. He or she can address a broad array of questions competently. Personal financial advisors also make investment recommendations, provide objective advice and help clients weigh the financial consequences of life decisions. They also help clients stay organized.

Personal financial advisors must have expertise in tax planning, asset allocation, risk management, retirement planning and estate planning in order to help clients at all stages of life and in a variety of circumstances. In some cases a client will let his or her personal financial advisor act as a fiduciary, meaning that the client gives the personal financial advisor permission to make decisions on the client's behalf without consulting the client for approval beforehand. Personal financial advisors often charge by the hour or they charge the client a percentage of the assets under management.

Why Does a Personal Financial Advisor Matter?

Personal financial advisors help millions of people get financially organized and help them make educated life decisions.

In most states, anyone can call himself a personal financial advisor because there are few licensing requirements and little regulation. There are several credentials that personal financial advisors can obtain, however, and the most common is the Certified Financial Planner (CFP) designation. An advisor must pass the CFP test, have an appropriate level of prior education, sign a code of ethics, and have several years of actual planning experience before obtaining the right to use the CFP designation. CFPs must also obtain a certain number of hours of continuing education every year to keep the designation.

Several organizations help people find qualified personal financial advisors, including the National Association of Financial Advisors (NAPFA), the Financial Planning Association (FPA) and the Certified Financial Planner Board of Standards.