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. The financial advisor you choose will depend on your financial situation and your needs.
If you’re looking for a financial advisor, it’s important to know that there are several types — “financial advisor” is an umbrella term that includes a variety of services. Here’s how to find the right financial advisor for you.
4 steps to choosing a financial advisor
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. You also want to make sure you choose a financial advisor you can afford: Financial advisors have a reputation for being costly, but these days there is an option for every budget.
» Learn more: What is a financial advisor?
We recommend following this process to choose a financial advisor who meets your needs.
1. Understand the types of financial advisors
You can receive financial guidance from a variety of services, ranging from online robo-advisors to local, in-person traditional advisors. Here’s a rundown of the major options:
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, easy entry: 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.
» See our top picks for best robo-advisors.
Online financial planning services
This is the next step up from a robo-advisor: an online financial planning service that offers virtual access to human 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 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. Facet Weath and Personal Capital are examples of services in this space.
- Medium cost, varied minimums: Online financial planning services will typically cost less than a human 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 need a financial advisor and a holistic financial plan, but at a lower cost than a traditional in-person advisor.
» See our picks for the best online financial advisors.
Traditional financial advisors
Traditional financial advisors include certified financial planners, stockbrokers, registered investment advisors and wealth managers. The same person can have more than one of these titles. For instance, a CFP may also be a registered investment advisor. You’ll typically meet your advisor in person in a local office.
- Higher cost, higher minimums: This is often the highest-cost option, and some advisors also require a high minimum balance, such as $250,000 in assets.
- Good when: You want specialized services, your situation is complex or you want to meet your financial advisor in person.
2. Choose which services you want
If you simply want help choosing and managing investments, a robo-advisor is a streamlined, cost-efficient choice. It’s also good for those just starting out, because robo-advisors often have low or no account minimums.
If you have a complicated financial situation or want holistic advice on topics like estate planning, insurance needs, etc., you might want to choose an online financial planning service or a human financial advisor in your area. If you don’t mind meeting with your advisor virtually, you may save money with an online service. These services also typically have lower account minimum requirements than a human advisor might.
It often makes sense to start with a robo-advisor or online planning service — you can always hire a traditional financial advisor if your situation grows more complex.
3. Consider what cost level works for you
It’s important to understand a financial advisor’s costs and fees 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 typically charge either a flat subscription fee, a percentage of your assets or both. For example, Personal Capital charges 0.89% of assets under management per year. Facet Wealth charges an annual fee that starts at $600 a year and goes up based on the complexity of your financial situation. Both fees include portfolio management and financial planning.
- Traditional human 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.
4. Check out qualifications and standards
Always check out the record of the company or person you’re considering by looking up the firm’s Form ADV. Among other things, this form will outline how the firm or advisor charges for its service (and what the specific fees are), conflicts of interest and any past disciplinary actions.
We also have a list of 10 questions you should ask a financial advisor — including whether they hold to a fiduciary standard, which requires that they act in your best interest.
Recommended financial advisors
Now that you understand how to find a financial advisor and what to look for, you might be interested in specific recommendations for advisors. Below are some of our picks for the best robo-advisors and online financial planning services:
|SoFi Automated Investing||Why we like SoFi:|
SoFi charges no management fee and offers unlimited access to a team of CFPs.
» Read our full review
|Management fee: 0%
Account minimum: $0
Promotion: Free career coaching, plus loan discounts with qualifying deposits.
|Wealthfront||Why we like Wealthfront:|
Wealthfront is strictly digital, with powerful financial planning tools and a low management fee.
» Read our full review
|Management fee: 0.25%
Account minimum: $500
Promotion: $5,000 managed free for NerdWallet readers.
|Compare more robo-advisors|
|Online financial planning services|
|Why we like Facet Wealth:|
Facet Wealth offers dedicated CFPs and charges a flat fee based on how much financial advice you require. Investment management is included.
» Read our full review
|Management fee: $600 to $6,000 per year. Account minimum: $0|
|Why we like Personal Capital:|
Personal Capital offers dedicated CFPs and charges a percentage of assets under management.
» Read our full review
|Management fee: 0.89%
Account minimum: $100,000
Promotion: 2 free months of financial advisory services for NerdWallet readers.
|Compare more financial advisors|