Financial Advisor

A financial advisor or a personal finance guide is a professional who provides investment advice and financial planning services to individuals and businesses. They help the clients protect their wealth, grow it, avoid costly mistakes, and implement the investment strategies on time. Financial advisors use stocks, bonds, mutual funds, real estate, options, futures, notes, insurance, and other investment products to meet the needs of their clients. They do this in a meaningful and responsible manner based on the situation and the needs of their client.

Financial advisors get their remuneration by way of service charges from the clients. They also get a commission for the various financial products they sell as agents. Financial advising is becoming very popular in the financial services industry.

Essentials of Financial Advising

A financial advisor provides assistance to his clients in the following manner:

  • Assess the current position of the client – client’s net worth, income, expenses, debt, etc.
  • Evaluate the flow of money in their life.
  • Launch small, systematic, daily changes to transform their financial life.
  • Make informed decisions about savings and investment based upon a greater understanding of the investment options and the client’s goals.
  • Develop simple strategies that will work both in good times and bad times.

Functions of a Financial Advisor

  • A financial advisor is one who uses savings and investment techniques to help the client understand how to meet his life’s financial goals. The advisor takes a clear view of the client’s financial situation and makes investment and savings recommendations that are suitable for him. This approach of a financial advisor to achieve the client’s financial goals makes him distinct from other professionals like Insurance Agents, Stock Brokers, etc. who are trained to concentrate only on a particular area of the client’s financial requirements.
  • A financial advisor acts as a best friend who advises the client on the ways of achieving the financial goals set by the client. He is a client-oriented professional who works in the best interest of his customers.
  • A financial advisor discusses and suggests a very well-organized, well-planned system of adopting strategies for using the client’s financial resources to attain both short- and long-term financial goals.
  • The financial advisor’s role doesn’t just stop with giving suggestions to the client. He also reviews, monitors at regular intervals, and suggests changes in the strategies of the client for achieving the financial goals.
Financial Advisor

Traits of an Effective Financial Advisor

Effective Communication

The financial advisor has to be an effective communicator. He should understand that communication happens on both sides and shouldn’t try to impose his ideas upon them without letting them speak. He should first be a good listener to properly understand the client’s motives and his situation.

Problem Solving Skills

A financial advisor should understand the needs and problems faced by the client and suggest different options to him to solve the problems. It is very important to understand the client’s needs from their perspective. The financial advisor should make sure that the investment and other financial recommendations solve the client’s financial problems. The financial advisor should have excellent problem-solving skills to save the client from market-associated problems which may arise at any time.

Analytical Mindset

A financial advisor has to carry out great research and analysis to be able to guide businesses and individuals in making investment choices. So, an effective financial advisor should be able to analyze the market, the current situation, and all the short-term and long-term opportunities to be able to suggest the best solution to the client.


A financial advisor should maintain strict confidentiality of the client’s financial position and well his goals and motives as they are very personal in nature. The client may not be willing to disclose them even in front of his family members, leave alone other parties.

Knowledge Update

The financial world is changing very rapidly. The Government’s policies, Federal Reserve’s initiatives, and the movements in the financial markets are closely watched by the financial advisor. It helps him suitably advise the client based on the current trends in the market.

Steps Involved in Financial Advising

Step 1. Perform a ‘GAP’ Analysis

The first step is to check the present financial position of the client and then determine what is the desired state. When we check the present financial position of the client, we also check his skills, his risk-taking capacity, knowledge, etc. The course of action identifies the necessary skills, knowledge, and abilities to reach the desired state.

Step 2. Identify Priorities and Importance

After identifying the gap, the financial advisor has to determine if the identified needs are real and whether they are worth addressing. The advisor then specifies their importance and urgency in view of the goals set by the client. If some of the needs are of relatively low importance, it is better to devote our energies to address the other problems with greater impact and greater value.

Step 3. Develop a Strategy

After assigning importance and priorities to the client’s needs, the next step is to develop a course of action or strategy to reach the desired state. The ultimate aim of this strategy is to help the client achieve his financial goals no matter how much simple or complex they may be.

Step 4. Identify Problems and Opportunities

After developing a strategy, the next step is to identify what could be the potential problems in reaching the desired state and what are the opportunities. The objective here is to identify in advance what problems can arise and have possible solutions ready.

Step 5. Implement and Monitor

The last step is to implement the strategy or the course of action and then continuously monitor the performance of the various investment choices made. Continuous monitoring becomes important in financial advising because of the market’s highly volatile nature.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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