What Does a Financial Advisor Do?

For many people, embarking on an investment journey means playing the roles of captain, navigator and rower simultaneously. Juggling those duties can be overwhelming, especially for people who don't have

Anna-Louise Jackson

For many people, embarking on an investment journey means playing the roles of captain, navigator and rower simultaneously. Juggling those duties can be overwhelming, especially for people who don't have their investing sea legs yet.

Instead of flailing about in unfamiliar waters, welcome a financial advisor aboard to ensure your investing goals stay on course. Financial advisors range from the hands-on, personalized approach of human advisors to the automated solutions of robo-advisors  " or a hybrid model combining the two. Deciding what type of financial advisor will serve you best depends largely on how much you're willing to spend and the range of services you desire.

If you've come seeking answers about what financial advisors do, your curiosity likely is less a question of how these advisors spend their days and more about what one can do for you. Here's what you need to know.

What a human financial advisor does

First, let's get a few things straight. Financial advisor is a generic term for a person or service providing advice in exchange for compensation. For the human variety, the catch-all term refers to people with a variety of designations, including certified financial planners or registered investment advisors.

» Where should you begin? Read more about how to choose a financial advisor.

As for what a financial advisor does, it's pretty straightforward: This professional provides the hands-on planning and assistance necessary to help you achieve your financial goals. The main purpose of hiring an advisor is to delegate some (if not all) of the duties inherent to managing your finances.

Expect to have in-depth conversations about your finances, existing investments, short- and long-term goals and your tolerance for investing risk, among other topics. This is a relationship-based business, so it's important you trust this person to dive into all aspects of your financial life.

Hire an advisor who is qualified (ideally one who's a fiduciary, meaning she'll put your interests first) and whom you're comfortable working with for the foreseeable future. This person likely will help you navigate some of life's most stressful situations, such as planning for kids, getting a divorce or experiencing  the death of a spouse or other family member.

What a robo-advisor does

In the sales industry, there are so-called high-touch customers, who require a lot of persuasion, meetings or demonstrations prior to buying something, and low-touch customers, who require very little of the above. In the world of financial services, human advisors provide the high-touch approach, whereas robo-advisors cater to those looking for a low-touch solution.

Expect to pay money for financial advice of any variety, though costs will vary depending on how extensive or personalized it is. It probably doesn't come as a surprise that working with a person costs more than working with a computer. A robo-advisor may be a better fit if the human touch sounds like more than you need, desire or can afford at this stage of managing your finances.

» Ready to get started? Check out NerdWallet's picks for best robo-advisors.

Robo-advisors strive to replicate, as best as possible, what a human financial advisor does. Instead of a sit-down conversation, your first interaction will most likely be a questionnaire from the company you've selected as your provider. Be honest, just as you would with a person, because the questions are designed to identify the same issues: your goals, investing preferences and risk tolerance.

Based on the information you provide, the robo-advisor's algorithm will recommend a portfolio that's typically built using low-cost exchange-traded funds and index funds. Expect your robo-advisor to recommend necessary changes to your portfolio over time, and offer regular rebalancing and financial planning tools to complement its services. But the robots aren't completely in charge. You can and should make tweaks, as necessary, if the recommendations don't fit with your goals.

What a hybrid financial advisor does

As in the tale of Goldilocks, sometimes two options aren't sufficient for finding what's 'just right.' If a human advisor and the associated expenses sound like more than you need, and a robo-advisor feels too hands-off, consider a hybrid solution.

A  hybrid financial advisor combines aspects of the robo-advisor and human advisor models. Expect access to low-fee, automated management of your portfolio on a day-to-day basis, with access to human advisors for more personalized assistance, as needed. The number of advisors and their availability can vary widely by provider, so consider how frequently you desire advice and via what  medium (chat, email or phone, for example).

» How do hybrids, robo-advisors and human advisors compare? Find an advisor that works for you.

The hybrid model appeals to people who want some of the human touch, be it for financial planning, discussing goals or simply reassurance. There's a slight premium, compared to other robo-advisors, for the option to contact a human advisor. Still, the cost is much  lower than working with an advisor full time.

Which financial advisor is best for you?

Deciding which variety of financial advisor is best for you largely comes down to personal preference, how much wealth you've already accumulated, the types of investments you seek and how much you're willing to pay for advice. There are no specific rules, but generally speaking, human advisors will require a minimum net worth (often $250,000 and up) and robo-advisors often appeal to people who are starting their investing journey.

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Anna-Louise Jackson is a writer at NerdWallet. Email: ajackson@nerdwallet.com. Twitter: @aljax7.

The article What Does a Financial Advisor Do? originally appeared on NerdWallet.