Finding a financial advisor is easy — it's choosing the right advisor for you that can be a challenge. The decision is as much about making sure the advisor provides the services you need as it is about making sure there's a personality and overall philosophy fit. For the relationship to work, you need to feel comfortable.
Start with who you want to rule out
One thing to know up front: There may be barriers to entry with some advisors — financial advisors vary a great deal when it comes to asset minimums. Among the advisors we've analyzed, a $250,000 asset minimum is common, but we've seen plenty of advisors that have no minimum at all, and plenty more that have minimums even higher than that.
Whether you can meet an advisor's minimum isn't the only upfront consideration. You may also want to weed out:
Fee-based or commissioned advisors. Generally speaking, you may want to avoid advisors who earn a commission or other incentive for recommending certain investments or selling products, such as insurance. Instead, look for fee-only advisors who are paid directly by you. This helps avoid conflicts of interest. ("Fee-based" means the advisor is paid by clients but may also earn income from other sources, such as commissions.)
Advisors who aren't a fiduciary. A fiduciary duty means the advisor is required to work in the client’s best interests rather than their own or their firm’s. Fiduciaries have both a duty of care (which means they have to provide advice that is in the client's best interest) and a duty of loyalty (which means they can't place their own interests ahead of a client's interests). Under the Investment Advisers Act, registered investment advisers are held to a fiduciary standard.
Advisors without verifiable credentials. The term "financial advisor" is not regulated — anyone can use it. Credentials and certifications can help you understand an advisor's training and experience. For example, a certified financial planner (CFP) has completed financial coursework and gained enough experience to achieve one of the most rigorous certifications for financial planning. They also are fiduciaries and sign an ethics agreement when they’re accredited by the CFP Board.
» Want a shortcut? Read our roundup of the best financial advisors
Decide what you want the financial advisor to do
Many people seek out a financial advisor for the first time after a significant life change — buying a house, getting married or having a child, for example. These life events can have major financial implications, and upfront financial planning can go a long way toward building a stable financial future. Similarly, changes to your financial situation can necessitate hiring an advisor — things like a large salary increase or an inheritance.
A financial advisor may address all of the above, or just a piece of it, or far more than you actually need. That’s why it’s important to clarify what you’re looking for before picking an advisor, so you can be sure they have the tools, experience and working style to help you. What are your most pressing questions? What problem(s) do you hope to solve?
If you need someone to manage your investments: Many financial advisors are also investment advisors, which means they help decide where to invest your money and make changes to those investment elections as needed. The investment options they offer will vary. If you don’t need financial planning, your portfolio is relatively straightforward and you want automated management, you could consider a robo-advisor. These services manage your portfolio for around a quarter of the cost of a full-service financial advisor. If you have more complex investing needs, look for an advisor who has experience with similar cases and the ability to customize your investment approach.
If you need tax strategy and planning: Inheritance, equity compensation and other scenarios tend to involve tricky tax situations. If you’re in that boat, consider looking for an advisor with expertise in tax strategy. You may also want an advisor who is a licensed certified public accountant (CPA).
If you need to plan for retirement: Look for a financial advisor who can help you create a retirement planning strategy, including how much to save, where to save it and how to balance this kind of ultimate financial goal with other priorities you may have.
If you want estate planning: Most financial advisors will talk through what you need in your estate plan to protect your assets and ensure your loved ones have everything they need after you're gone. But they may refer you to an estate attorney or third-party service to draft the actual documents, which means additional appointments, conversations and fees. Ask detailed questions about what estate services a firm offers — and doesn’t — if you know you’ll need help setting up an estate plan or a trust.
For some financial planning services, such as tax filing, setting up trusts or creating business entities, you may need to find a specialist. So if you know you need a particular service, keep that top of mind when you start your search.
Decide what and how you want to pay
Financial advisor fees vary widely, as do fee models. Before you search for an advisor, take time to understand how financial advisor fees work, and align your expectations with your budget.
For an ongoing relationship with the advisor, the most common fee structure is an assets under management, or AUM, fee. This means the advisor charges a percentage of your assets each year, commonly around 1%. Other advisors charge a flat annual fee.
For a one-time or limited engagement — meaning the advisor creates a financial plan you then follow on your own, or meets with you to provide guidance and direction on a specific goal or financial decision — advisors generally charge either hourly or a flat rate.
You can influence how much you spend by exploring your options.
Financial planning fees vs. investment management fees: Many financial advisors combine these two major services in one fee, but separating them — or even dropping one, if you don’t need it — could lower your costs and clarify what you’re paying for. For financial planning with no investment management, consider working with an advice-only financial advisor. For investment management only, you might save money by working with a robo-advisor as noted above.
Type or depth of relationship: The duration of your relationship with an advisor (temporary vs. ongoing), as well as the mode of communication (in-person vs. virtual) may influence the cost. If you just want a one-time plan you follow yourself, you'll likely pay less than you would pay for an ongoing relationship with an advisor.
Level of financial guidance: As the complexity of your finances increases, so might the cost of financial advice. Similarly, the more you want an advisor to do for you (rather than doing it yourself), the more you’ll likely pay.
As you dig into these different dimensions, you’ll find that help exists for every budget and situation. You might also want to think about how you pay — under an AUM model, that fee is generally taken directly out of your investment accounts. When you pay a flat fee or hourly rate, it will come out of your cash flow. There are pros and cons to each, so it's worth thinking about this aspect in addition to the total cost.
Choose the financial advisors you may want to work with
Now that you have a better idea of what you want — and don't want — there are several ways to kick off your search. An easy starting point is your personal network. Often, people have long-term relationships with their financial advisors. Check with family and friends — or even your tax preparer — to see if they can point you in the right direction. If your colleague has worked with an advisor for 10 years and loves them, it's probably a good sign.
You also could:
Use a financial advisor matching service. Providers like Zoe Financial, Harness Wealth and Wealthramp will match you with a financial advisor for free. The advisors typically pay to be part of the service or to receive a client match, and they have to meet certain criteria to participate. That means the matching service is doing some of the work of vetting the advisor for you.
Check with professional organizations or networks. These offer directories you can filter for criteria that matter to you. The National Association of Personal Financial Advisors lists fee-only advisors who follow a strict code of ethics. The CFP Board provides a list of CFP professionals, who hold one of the most well-regarded credentials. And CHIP’s directory includes Black, Hispanic and Latinx financial advisors and professionals who can assist with estate planning, tax strategy and financial planning.
Search for local advisors if you want someone you can meet in person. Use our tool to search for a financial advisor near you.
The goal is to make a short list of advisors who seem like good options for you.
Vet the financial advisors on your list
With your list in hand, it’s time to take a deeper look at your potential advisors. Remember, you’re planning to entrust this person with sensitive financial information and give them weight in your decision-making. Vetting advisors requires doing some due diligence.
You can review any registered investment advisor's regulatory filings on the SEC's Investment Adviser Public Disclosure website. Pay special attention to the advisor's Form ADV, also available on the SEC website. Look for details about fees, disclosure of any disciplinary action in the firm’s past and current relationships with other companies that might present conflicts of interest.
If the advisor is a CFP, you can also review any disciplinary history and confirm the advisor still holds that credential via the CFP Board’s website. Other credentials can generally be verified by the organization that issues that credential.
Once they've passed that records check, you'll want to set up some initial consultations. It’s normal to meet with a few financial advisors before you decide who to hire. It’s really the only way to determine if you’ll like working with someone. Bring questions — if you’re not sure what to ask, we’ve prepared a list to get you started.
This is a good time to ask about anything you can’t find in official documentation, such as the Form ADV or the advisor’s website. For example, fee information is typically in Form ADV, but it may lack specifics.
Hire the financial advisor
Once you decide who to hire, you’ll typically follow these steps:
The advisor provides an engagement letter that outlines their services, ethical principles and any potential conflicts of interest.
The advisor provides you with legal documents to sign.
The advisor gathers information on your financial situation and starts managing your finances.
A financial advisor also should carefully go over fees with you before you sign up for their services. That includes any fees you’ll have to pay in addition to paying the advisor — for example, investment costs. On an ongoing basis, you should be able to see how much you’re paying in management fees on your account statements.
Some advisors may be willing to negotiate their fees, asset minimums or both. It never hurts to ask.
