What Financial Advisors Can and Cannot Do

A full-service financial advisor’s work can extend well beyond investment management. Qualified professionals may help with day-to-day financial planning, retirement strategy, and preserving your wealth over time. However, as a client, it’s critical to understand that an advisor or wealth management firm may not provide every finance-related service you need.

In this article, we’ll outline the services you can reasonably expect from a financial advisor, as well as those that may fall outside their role, such as preparing tax returns or drafting estate planning documents. We’ll also explain when it may make sense to involve another professional, such as a CPA or estate planning attorney.

How a Financial Advisor Can Help You

Between your investment portfolio, helping grow and preserve wealth, and managing life goals such as retirement, a financial advisor’s skillset can intersect with multiple areas of your finances. The exact scope may vary, though, making it vital to know what your advisor can handle directly, and where another professional might need to step in.

A typical financial advisor is usually able to provide several different services, which often include:

• Creating and updating a comprehensive financial plan
• Managing investments and asset allocation
• Planning for retirement income and withdrawals
• Reviewing tax-efficient strategies
• Coordinating estate planning needs
• Managing risk and insurance considerations
• Planning for major life events and financial goals
• Monitoring progress and adjusting the plan over time

An advisor can also prove to be an invaluable second set of eyes. According to Derrick Schuler, Wealth Planner and CFP^® at Schuler Wealth Planning, a key but intangible service a professional can provide is “providing peace of mind that [a client is] heading in the right direction towards their goals (or not).” He explains an advisor can help by “putting actionable steps in place to achieve their goals and educating clients so they have confidence in their own financial path.”

What Can’t a Financial Advisor Do For You?

Even a full-service financial advisor has limits to what they can do. In some situations, an advisor may be able to offer guidance or help you plan, but another qualified professional will need to handle some of the actual work.

Most notably, many advisors don’t prepare tax returns or draft legal documents, such as wills or trusts. According to Curt Scott, CFP^®, president and investment advisor at Scott Financial Group, these “are the two most common areas where financial advisors can develop strategies and offer suggestions, but many lack the appropriate license, authority, or expertise to execute the plan.”

A financial advisor also can’t guarantee investment returns or eliminate investment risk. While an advisor or firm may have expertise in investment management, market research, or managing risk, no professional can promise that a portfolio or strategy will produce a specific result.

In the case of special tasks like estate planning or tax preparation, an advisor may coordinate with or refer you to professionals such as a certified public accountant (CPA) or attorney. “A financial advisor can be like a quarterback or coach that sees the whole field, or the bigger picture, and then works with CPAs, estate planning attorneys, or insurance professionals to provide a cohesive plan (or strategy) for a client’s financial life,” says Schuler.

Finally, a financial advisor may have limitations in what they can do on your behalf. When they make a recommendation, such as how much you should invest or which accounts to keep your money in, it’s often up to you to make those moves. If you grant an advisor discretionary authority over an investment account, they may be able to make certain investment decisions without getting your approval for every trade.

How to Know What Services an Advisor Offers

Among financial advisor firms, services can vary. For instance, a company may be more geared toward high-net-worth clients and thus provide more personalized assistance. Before you select a firm, it’s important to both ask a prospective advisor questions about their employer and thoroughly research it to ensure you’re getting what you need.

The first step, before considering a firm at all, is to determine what you need as a client. This should be a non-negotiable service that you’re looking for, like portfolio management or building a comprehensive financial plan.

From there, ask prospective advisors directly which services are part of their standard offering and whether any come with an additional cost. You may also want to find out whether specialized needs are handled in-house or through third parties.

Here are some specific questions to ask:

• What services are included in your fee?
• Which areas of financial planning do you handle directly?
• Are any services charged separately?
• How do you handle estate planning needs, and do you work directly with an estate planning attorney when necessary?
• Which services do clients commonly assume you provide that actually fall outside your role or firm’s capabilities?

Regulatory documents are another useful source of information. A firm’s Form ADV outlines its advisory services, fees, minimum account requirements, business practices, and potential conflicts of interest. Additionally, Form CRS provides a shorter overview of the client-advisor relationship, including the types of services offered and how the firm and its advisors receive compensation. Your advisory agreement should also spell out the specific services and responsibilities included once you become a client.

Both reviewing these documents and asking an advisor direct questions can help you avoid assuming a firm provides a service that it doesn’t include. The goal is to find an advisor whose capabilities line up with the areas of your financial life where you need the most help.

Bottom Line

A financial advisor can play a broad role in your financial life by helping with investment management and holistic planning. Still, no professional or firm can handle every need directly. Some services, such as estate planning or tax preparation, may require help from an attorney, CPA, or another specialist.

Before hiring an advisor, make sure you understand where their responsibilities and services begin and end. The right fit should be a professional whose capabilities align with your needs.

If you’re still comparing your options, you can use this free financial advisor matching tool to find the right fit. After a few questions about your current situation and goals, it’ll pair you with a professional who suits your needs.