How Do I Find a Financial Advisor?

A financial advisor can help you with a one-time need, such as developing a long-term financial plan, or can be a long-term financial guide.

Moreover, the term financial advisor applies to several professions, including financial planners, investment managers, and financial coaches. It’s worth noting that there are no general licensing or certification requirements for financial advisors, although specific professionals need to meet certain requirements.

For these reasons, it’s best to take your time finding one and consider your goals, peer recommendations, an advisor's background, and the advisor's fee structure before choosing.

Define Your Needs

Before you hire a financial advisor, give some thought to what you want a financial advisor to do for you. For instance:

• Are you seeking help with your retirement plan? A financial advisor should be able to guide you toward making choices about long-term investments.
• Are you confused about whether to invest in stocks, bonds, mutual funds, exchange-traded funds (ETFs), or something else? A financial advisor can answer your questions.
• Are you drowning in debt? A financial advisor can offer advice on how to climb out of the hole.
• Are you striving to achieve a short-term financial goal such as your child’s college education or a second home on the beach? A financial advisor can help you prioritize the steps you need to take to realize that goal.
• Are you puzzled about your taxes? A financial advisor is equipped to take the mystery out of taxes.
  

Understand the Costs

As you’re thinking about hiring a financial advisor, take into account how much it will cost to use their services. The amount can vary widely depending on the services being provided.

A financial advisor might, for example, charge a one-time fee of $2,500, an annual retainer fee of $4,000, or an hourly fee of $250. Or, the advisor might charge a percentage fee, such as 1% for managing assets worth up to $1 million.

If you’re working with a financial advisor who’s buying and selling investment products on your behalf, the advisor might receive a fee equal to 1% to 2% of the transaction value or might charge you a flat fee.

If the cost is prohibiting you from acting, be sure to ask the financial advisor whether they offer a payment plan.

Do Your Research

If you’re going to entrust your financial well-being to a financial advisor, it’s smart to do your homework. What type of advisor do you need? How do you know they’re reputable?

Decide on the Type of Advisor You Need

When you shop around for a financial advisor, pay attention to the services they provide. The types of financial advisors you’ll come across include:

• A fee-only advisor, such as a financial planner, makes money by charging fees for their services. They don’t earn commissions on investment products they buy and sell on a client’s behalf. The advisor may be a fiduciary advisor, a special qualification that commits the person to always acting in the best interests of the client.
• A fee-based advisor, such as a stockbroker, earns a commission on investments being bought and sold. They also might charge an hourly fee, flat fee, or percentage fee.
• A commission-based advisor, such as an asset manager, earns fees solely from the sale of investment products and services.
• A registered investment advisor can be an asset manager or investment manager. They may charge a percentage fee or an hourly fee.
• A robo-advisor is a digital platform that automates investment decisions based on a client’s input.

Verify a Financial Advisor’s Background and Credentials

Another factor that goes into selecting a financial advisor is reputation. If the person is licensed or certified, it’s fairly easy to investigate their background and credentials through an online search. Here’s how.

• Use the Financial Industry Regulatory Authority (FINRA) BrokerCheck tool to research a stockbroker or any other professional who buys and sells investment products.
• Take advantage of the Investment Adviser Public Disclosure tool from the Securities and Exchange Commission (SEC). With this database, you can investigate an investment advisor’s background.
• Use the SEC Action Lookup tool, which provides details about any investment professional who’s been named in an SEC court case or administrative case.
• Contact your state’s securities regulator. Visit the website of the North American Securities Administrators Association (NASAA) to look up the securities regulator in your state. A state securities regulator oversees certain investment professionals.
• Take advantage of the Verify a CFP professional tool. Here, you can check whether a certified financial planner (CFP) actually holds certification. Keep in mind that not all financial planners hold the CFP designation.
• Search the Better Business Bureau’s list of accredited financial consultants.
• Look at a financial advisor’s website and social media presence as well as online reviews from their clients.

Consider What Services You Need

Financial advisors offer an array of services. Consider which ones you need before hiring an advisor. They include:

• Investment strategy
• Insurance recommendations
• Retirement planning
• Tax planning
• College planning
• Estate planning
• Debt management
• Budgeting help
  

Where to Look for a Financial Advisor

Among the ways you can look for a financial advisor are by:

• Visiting the website of the National Association of Personal Financial Advisors (NAPFA)
• Using the Certified Financial Planner (CFP) Board of Standards tool for finding a CFP
• Seeking recommendations from relatives, friends, colleagues, and others you trust
• Getting a referral from someone at your bank or credit union
• Asking for a recommendation from a professional whose services you already use, such as your accountant or attorney
• Reviewing Investopedia’s list of the country’s top 100 financial advisors

Questions to Ask a Financial Advisor

So, how to find a financial advisor you can trust? Once you’ve zeroed in on a few that you’re interested in hiring, you should prepare a list of questions to ask each of them. Here are 12 good ones.

1. What services do you provide?
2. What are your areas of specialty?
3. Are you a fiduciary? (A fiduciary manages money on a client's behalf and must act in the client's best interest.)
4. How would you describe your investment philosophy?
5. What are your fees?
6. What will the total cost be for using your services?
7. Do you offer a free first-time consultation?
8. What is your professional experience?
9. What licenses or certifications do you have?
10. Have you ever been sued or disciplined over something related to your work as a financial advisor?
11. What types of clients do you have?
12. How do you like to communicate with clients?

The Bottom Line

Hiring a financial advisor is a big step in your financial life, whether you need assistance with retirement planning, investment strategy, or debt management. Because of the vital role that a financial advisor can play, it’s best to take your time finding one you feel you can trust.

Before making your choice, review your financial goals, seek recommendations, investigate an advisor’s background, and ask about the advisor’s fees.