What Exactly is a Financial Advisor?

Therein lies the problem: the title financial advisor is ambiguous. Unfortunately, it is used interchangeably for fee-only, fiduciary financial advisors as well as brokers or insurance agents, despite their starkly different roles and incentives. This makes it even harder for you to distinguish between great financial advisors – who are true experts and fiduciaries – and smooth-talking salespeople, who are incentivized to over-promise and sell products that earn them the highest commissions from banks and large financial institutions.

Why Is It So Hard to Find a Great Financial Advisor?

The financial advisor profession has developed a bad reputation, and for good reason. Although they are all called financial advisors, the majority of them are brokers or insurance salesmen instead of fiduciary advisors… and that matters.

As we discussed in Brokers vs. Advisors, brokers and insurance agents are essentially salespeople focused on pushing the most profitable products onto you for their companies’ sake. However, fiduciary fee-only advisors are only compensated by you, the client. This means that the advice they give is objective and transparent.

If you are unable to differentiate between a salesperson and a fee-only advisor, you will have to test their aptitude, knowledge, and expertise. That’s because to become an advisor you merely have to pass the Series 65 test, which can be accomplished after about two weeks of study time.

If the advisor’s expertise is adequate, then it’s up to you to figure out whether their expertise aligns with what you and your investments need. As described in What Makes For a Great Advisor?, the value that consumers are looking for from an advisor has changed dramatically over the last few decades. Back in the day, the value was in their ability to try to “beat the market” by picking stocks, bonds, or mutual funds on your behalf. Technology and product innovation have commoditized many of those tasks via more passive and cost-efficient investment vehicles, such as index funds or ETFs.

What many consumers want today is a household CFO who looks at their financial life holistically, incorporating risk management, budgeting, taxes, estate planning, and investments. Although many advisors promise this type of high-touch service, the reality is that most of their practices are stuck in the past and don’t quite live up to expectations.

We’ve listed a few instances in which you should consider hiring an advisor 

1. Nearing & Preparing for Retirement

This is by far the most common scenario we see.

Transitioning from living off a salary to living off your retirement investments happens only once in your life, so it pays to have a good financial advisor in your corner. 

There are plenty of decisions to be made, such as:

  1.  When should I fully retire?
  2.  Do I have enough saved up to live out the retirement I want?
  3.  When should I withdraw from my IRA and when should I start withdrawing from Social Security?
  4.  What is the appropriate mix of bonds, stocks, and cash that I should hold in my portfolio?
  5.  Which investments should I access first, taking into consideration market conditions and tax implications?

A financial advisor can walk you through all of these questions and more, ensuring your financial stability.

2. Newly Single, Legal Separations & Divorce

Losing a spouse, through divorce or death, can change everything when it comes to your personal finances. Whether it’s questions regarding property settlements or adjustments in income after a divorce, or death benefits and wills after a death, guidance from a qualified fiduciary advisor who specializes in these circumstances can be very valuable. 

3. Financial Windfalls

Receiving a large sum of money often creates a sense of anxiety as to how to properly manage it. Be it a business exit, inheritance, personal injury settlements, lottery winnings or life insurance proceeds; they all come with big decisions that require proper planning.

4. Starting a Family & Planning for College

Getting married or starting a family are big life decisions that raise even bigger questions for your financial situation, such as:

  1. How will the budget be handled?
  2. How do I align my financial goals and make the appropriate changes to beneficiaries in retirement accounts?
  3. When and how do I start planning & savings for my kids college?
  4. How do I set up life and disability insurance, write or adjust my will, or adjust my budgets now that I have a newborn?

5. Career Change

A promotion, a job change, a partner deciding to stay home to take care of the children, unemployment – all of these career changes come with new pending financial decisions. These include, amongst others, possible adjustments to budgets, retirement savings, college planning and health benefits. 

Ultimately, the time is right to speak with an advisor if you’re losing sleep over any of these financial decisions.

6. Special Needs Children

Parents with children of special needs have to often plan farther into the future. Considering different government benefits and creating the proper special needs trust after the parents’ deaths is a high priority.

Considerations When Choosing a Financial Advisor 


As discussed in How Do Financial Advisors Get Paid?, there are five primary ways advisors get compensated, depending on how aligned their interests are with yours. They include:

  1.  Fees as a percentage of the investments managed
  2.  Flat fees (retainer fees)
  3.  Hourly fees
  4.  Commissions per trade
  5. Commission kickbacks for products sold to you (such as insurance or mutual funds)

In addition to annual fees and/or commissions, you are usually responsible for paying the associated costs of the investment products (like ETFs and mutual funds) that the advisor chooses on your behalf. A plus of hiring a fee-only advisor is that they will try to keep the cost of these products low, since they do not get any kickbacks or commissions for their recommendations. 

Different Types of Fee-Only Advisors

Financial advisors come with all sorts of backgrounds and the value that they add can vary greatly. Even if an advisor is fee-only, that does not mean that they offer the same services or cater to the same types of clients. Some advisors only work with clients holding over $5 million in investable assets, while others focus on young professionals who do not have a lot of savings. Zoe helps match you with the right type of advisors for your specific goals and needs.