The 7 roles of a Financial Advisor

6 November

When you think of a Financial Advisor, you might see us playing one role. Jim Parker, Vice President of DFA Australia, believes good Financial Advisors actually play seven roles. And he describes these, and their benefits to you.

Many people still think an advisor’s only role is to deliver market-beating returns year after year. However, an advisor’s role should not involve making forecasts about markets or economies. Instead, a Financial Advisor should combine technical expertise with an understanding of how money issues intersect with the rest of people’s complex lives.

Indeed, a Financial Advisor’s value can be even more evident when volatility and emotions are running high. These are the seven hats advisor can wear – without ever once having to look into a crystal ball:

  1. The Expert: Investors need advisors who can provide client-cantered expertise in assessing the state of their finances and developing risk-aware strategies to help them meet their goals.
  2. The Independent Voice: The global financial turmoil of recent years demonstrated the value of an independent and objective voice in a world full of product pushers and salespeople.
  3. The Listener: The emotions triggered by financial uncertainty are real. A good advisor will listen to clients’ fears, tease out the issues driving those feelings, and provide practical, long-term answers.
  4. The Teacher: Getting beyond the fear-and-flight phase often is just a matter of teaching investors about risk and return, diversification, the role of asset allocation, and the virtue of discipline.
  5. The Architect: Once these lessons are understood, the advisor becomes an architect, building a long-term wealth management strategy that matches each person’s risk appetites and lifetime goals.
  6. The Coach: Even when the strategy is in place, doubts and fears inevitably arise. At this point, the advisor becomes a coach, reinforcing first principles and keeping the client on track.
  7. The Guardian: A long-term role for an advisor is that of a lighthouse keeper, scanning the horizon for issues that may affect clients and keeping them informed.

These are just seven valuable roles an advisor can play in understanding and responding to clients’ whole-of-life needs, which are a world away from the old notions of selling product off the shelf or making forecasts.

Knowing the advisor is independent—and not plugging product—can lead the client to trust the advisor as a listener or sounding board, someone to whom they can share their greatest hopes and fears.

However you characterise these roles, good financial advice ultimately is defined by the patient building of a long-term relationship founded on the values of trust and independence and knowledge of each individual.

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