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Financial advisors help people manage their money and reach their financial goals. They can provide a range of financial planning services, from investment management to budgeting guidance to estate planning. Picking the right financial advisor for your situation is key — doing so means you won't end up paying for services you don't need or working with an advisor who isn't a good fit for your financial goals.
1. Know what financial services you need
Identify why you're looking for financial help by asking the following questions:
Do you need help with a budget?
Do you want help investing?
Would you like to create a financial plan?
Do you need to get your estate plan in order or create a trust?
Do you need tax help?
Your answers to these questions will help determine what kind of financial advisor you'll need. If you just want assistance investing, a robo-advisor can invest for you for a minimal fee. If you have a complex financial life you may want to work with an online or traditional financial advisor.
2. Learn which financial advisors have your back
Financial advisors go by many names: investment advisors, brokers, certified financial planners, financial coaches, portfolio managers. There are even financial therapists. So who does what — and who can you trust?
Since some of the most common titles advisors use, including the term "financial advisor" itself, aren't tied to any specific credentials, don’t assume that someone who uses an official-sounding title has any specific training or credentials. Anyone who gives investment advice (which most financial advisors do) must be registered as an investment advisor with either the U.S. Securities and Exchange Commission or the state, depending on their assets under management.
Some financial advisors have a fiduciary duty to their clients, meaning they are obligated to act in their client’s best interest rather than their own. Always work with a licensed, registered fiduciary — preferably one who is fee-only, which means the advisor is paid directly by you and not through commissions for selling certain investment or insurance products. Certified financial planners have a fiduciary duty to their clients as part of their certification.
No matter what title, designation, certification or license an advisor claims to have, it’s on you to vet the advisor’s credentials and experience. Always research an advisor’s background by looking up the firm's Form ADV before you agree to work with them.
» Learn more about the different types of financial advisors
3. Learn about financial advisor options
Financial advisors aren't just available at your neighborhood advisory office or bank. There are lots of ways to get financial advice. The option that's right for you will likely depend on your personal preferences, the services you need and your budget.
A robo-advisor is a digital service offering simplified, low-cost investment management. You answer questions online, then computer algorithms build an investment portfolio according to your goals and risk tolerance.
Low cost: Fees start as low as 0.25% of your balance, and many services have no or low account minimums, so you can start investing with a small amount of money.
Good when: You need help investing for financial goals like retirement but don’t want or can’t afford a complete financial plan.
Look elsewhere if: You need more rigorous financial planning. Though some robo-advisors offer higher-tier financial planning services, most excel at simple investment management.
» Ready to compare? Read our full roundup of the best robo-advisors
Online financial planning services and advisors
This is the next step up from a robo-advisor: an online financial planning service that offers virtual access to human financial advisors.
A basic online service might offer the same automated investment management you'd get from a robo-advisor, plus the ability to consult with a team of financial advisors when you have questions. More comprehensive services such as Facet Weath and Personal Capital roughly mirror traditional financial planners: You'll be matched with a dedicated human financial advisor who will manage your investments and work with you to create a holistic financial plan. Many online financial advisors can match you with an advisor with a top-tier credential such as a certified financial planner.
Medium cost: Online financial planning services will typically cost less than a traditional financial advisor but more than a robo-advisor. Some services have relatively high investment requirements of $25,000 or more; others require no minimum investment.
Good when: You're comfortable meeting with an advisor online but would still like holistic financial planning services such as estate planning, retirement planning or help with company stock options. Online advisor marketplaces such as Harness Wealth and Zoe Financial, and many online advisors themselves, do the work of vetting a financial advisor for you.
Look elsewhere if: You'd prefer to work with an advisor in person.
» Ready to compare? Read our full roundup of the best financial advisors
Traditional financial advisors
Traditional financial advisors can meet with you in-person and will be able to help you with all of your financial planning needs.
High cost: This is often the highest-cost option. Many traditional advisors charge around 1% of your assets under management. Some advisors also require a high minimum balance, such as $250,000 in assets.
Good when: You want specialized services, your situation is complex, you want to meet your financial advisor in person and develop a long-term relationship with them.
Look elsewhere if: You want similar services for less, are comfortable getting help online or don't want to vet a potential advisor yourself.
» Need some help? Find a financial advisor near you
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4. Consider how much you can afford to pay an advisor
Financial advisors have a reputation for being costly, but there is an option for every budget. It's important to understand how much a financial advisor costs before you commit to services. Generally speaking, there are three cost levels you're likely to encounter:
Robo-advisors often charge an annual fee that is a percentage of your account balance with the service. Robo-advisor fees frequently start at 0.25% of the assets they manage for you, with many top providers charging 0.50% or less. On a $50,000 account balance, 0.25% works out to $125 a year.
Online financial planning services and advisors typically charge either a flat subscription fee, a percentage of your assets or both. For example, Personal Capital charges 0.49% to 0.89% of assets under management per year. Facet Wealth charges an annual fee that starts at $1,800 a year and goes up based on the complexity of your financial situation. Both fees include portfolio management and financial planning.
Traditional financial advisors also often charge a percentage of the amount managed, with a median fee of 1%, although it can range higher for small accounts and lower for large ones. Others may charge a flat fee, an hourly rate or a retainer.
How much you should spend on a financial advisor depends on your budget, assets and the level of financial guidance you need. If you have a small portfolio, an in-person advisor might be overkill — you will save money and get the guidance you need from a robo-advisor. If you have a complicated financial situation, a robo-advisor may not provide what you need.
5. Vet the financial advisor's background
If you elect to work with a traditional financial advisor, you'll need to vet them. Verify any credentials they claim to have and check to see if they've had any disciplinary problems such as fraud. It's not a bad idea to do this as well if you work with an online financial advisor, but most will do the vetting for you.
We also have a list of 10 questions you should ask a financial advisor — including whether they hold to a fiduciary standard, what their fee structure is and how frequently you'll be communicating.
When should you talk to a financial advisor?
You can seek out financial help at any time, but it’s especially important to get financial guidance after significant life changes. Whether you’re buying a house, starting a job, getting married or having a child, these life events can have major financial implications, and some upfront financial planning can go a long way toward building a stable financial future.
It’s also wise to speak with a professional if your financial situation itself has changed. Maybe your salary has increased or you inherited some money from a relative. When money starts flowing in, it’s a good idea to give it a positive direction; otherwise, it can be all too easy to spend unnecessarily.
Why is "advisor" sometimes spelled "adviser"? Is there a difference?
While the two terms are often used interchangeably, “adviser” is the legal term used in the U.S. Investment Advisers Act of 1940 to refer to individuals who must register with either the SEC or with their state.
Today, “adviser” is commonly spelled “advisor.” The important takeaway is not to refuse to work with someone who uses an “o” instead of an “e,” but that the world of financial professionals and their titles can be murky; no matter what someone’s title is, you should ask for their certifications, verify them and make sure their professional designations line up with your needs. You can verify an investment advisor’s registration with the SEC’s Investment Adviser Public Disclosure tool (it also has a database that includes state-registered advisors).
Where can I get free financial advice?
Many banks and brokerages offer free online libraries of financial advice and tools, so ask your existing financial provider what is available to you. Some organizations like the Foundation for Financial Planning offer free help to people in need, including veterans and cancer patients. And while you shouldn’t believe everything you read on the internet, there are tons of reputable sources for financial information online, including government resources like Investor.gov and the Financial Industry Regulatory Authority. For more resources, check out our guide to getting free financial advice.