Money isn’t everything, but everything about it matters. When you’re looking for someone to help you manage and grow your money, you want to be sure you trust that person and the firm they work for. Here is why this decision is important — read more here for suggestions on how to find the best financial advisor for you. Learn about the types of advisors you can choose from, how to talk about
the help you need, where to search, and what to ask.
Understand the Types of Best Financial Advisor You Can Choose From
Financial advisors assist clients with investment choices, and you can choose from different types of advisors. The terms financial advisor, investment advisor and financial planner are often used interchangeably. They have specific differences, but each expert gives advice on how to manage money. You could hire an advisor with their own company, an advisor who is a small cog in a massive multibillion-dollar investment conglomerate wheel or an expert somewhere in between.
Financial advisors may also help with money management, create financial plans, give general financial advice or sell financial products. Regardless of their title, professionals who receive payment for giving advice on investing in securities must be registered. The people who are in the business of buying and selling stocks, bonds, mutual funds and other securities are called brokers or registered representatives. They make trades on behalf of clients in exchange for a fee, commission or both.
Like investment advisors, brokers have to pass exams and register with the SEC, but they are regulated by the Financial Industry Regulatory Authority (FINRA). You can look up brokers you are considering working with on the regulatory authority's BrokerCheck site. You can look up an advisor or firm you are researching on the SEC advisor search website.
One major difference between brokers and investment advisors has to do with the standards under which they must operate. Investment advisors are bound to a fiduciary standard that requires them to always put the clients’ best interests first. Brokers, on the other hand, must adhere to a suitability standard. This means the broker must have a reasonable basis for believing that his or her recommendation is suitable for you based on your current situation.
Financial planners are different from investment advisors or brokers in that they offer advice on total financial health (cash flow, debt, employee benefits, retirement, insurance, taxes and estate planning) without giving investment advice on what securities to buy. A financial planner can help clients figure out how much of their assets they might want to commit or allocate to an investing strategy, but unless the planner is also registered as a financial advisor, they can’t legally offer specific investing advice.
Determine What Kind of Help You Want and Need
An individual soul search or a meaningful conversation with your partner is the best place to start before you look for a financial advisor. From there, you can evaluate what you actually need help with. A financial advisor can help set you straight if you are facing any of these life experiences:
A major life change like marriage, divorce, or kids
Worries about retirement
Possible layoff from your job
Issues with your business
A recent windfall
If you need general financial advice, you could consider working with a financial planner or a financial advisor who is also adept at financial planning.
Decide How Much You Want to Pay
Compare fees — whether it’s an hourly rate or monthly percentage of the assets you have with the firm — before you make a decision. Reputable firms are upfront about what they charge and what you will pay.
Research Your Options
Spend some time researching financial advisors. You can opt for a general search by typing “financial advisors near me” into Google, or you can access a search entity like U.S. News and World Report to search for a financial advisor who will meet your specific needs.
If you feel like you want to start with a financial planner, you could access the searchable online database of Certified Financial Planners® (CFPs) at LetsMakeAPlan.org.
Once you narrow down your choices, set up a meeting. The majority of financial advisors and planners offer a complimentary introductory meeting. The SEC’s Investor.gov site suggests asking these questions when you evaluate possible financial advisors:
Are you registered with the SEC, a state, or FINRA?
May I have a copy of your firm’s latest Form ADV, including the brochure and the brochure supplement?
Have you, the firm or any supervised persons ever been disciplined by any regulator? If yes, for what reasons and how was the matter resolved?
Have you ever been sued by a client who was not happy with your work or the services you provided or the products you recommended?
How are you paid for your services? What is your usual hourly rate, flat fee, or commission?
What experience do you have, especially with people in my circumstances?
Where did you go to school? What is your recent employment history?
What products and services do you offer? Are you only supposed to recommend a limited number of products or services to me? If so, why?
Which Financial Services Do You Need?
Financial advisors provide a wide range of services. At their most basic, a financial advisor will manage your investment and retirement funds and assets for you, buying and selling investments in custodial brokerage, retirement, bond, real estate investment trust (REIT) and alternative investment accounts. Some financial advisors provide additional services like financial planning, tax preparation and strategies, retirement advice, college planning, estate and legacy management, career guidance or advice on starting a company.
Financial planning: If you’re not sure where you are headed financially or if you don’t have much in the way of assets to invest, your best bet might be to hire a financial planner. A CFP® is considered the gold standard in financial planning.
Investment advice: If you have money that you want to invest, a licensed financial advisor can review your risk tolerance and invest your money for you. Financial advisors cannot guarantee a return, so be sure you understand the risk involved.
Fiduciary commitment: If you hire a fiduciary financial advisor, they must act in your best interest at all times. Fiduciary status means that they seek the best prices, terms and products for your situation; act in good faith in all their advice to clients; and avoid conflicts of interest.
What Type of Best Financial Advisor is Right for You?
In addition to ensuring that the advisor you choose is qualified to skillfully provide the financial services you need, the best financial advisor for you is a person you like and feel comfortable with. If you like the firm but don’t like the investment advisor representative assigned to you, ask for a different person. This is the person you will call for some of the most intimate advice you’ll ever ask for, so you want to make sure it’s a good fit.
National chain: If you feel most comfortable with big names like Fidelity Investments Inc., Charles Schwab Corp., UBS Group AG and others of that type, you can get started online with one of their national advisors or find a local representative to connect with in person.
Independently owned firm: A boutique firm in your town — or anywhere in the U.S. if the company provides remote service in your state — will provide full-service investment advice without the franchise feel of a big name.
Kathryn Hauer, a fiduciary investment advisor and Certified Financial Planner ™, adjunct professor, and financial literacy educator has written numerous articles and several books including the “11-Step, DIY, Comprehensive Financial Plan Workbook” and “Financial Advice for Blue Collar America.” She works to help clients and readers understand and act on complex financial information to keep them and their money safe. She functions as a strong advocate and guiding light for her clients as they move through murky and unfamiliar financial and career worlds. Read more at her website.
Frequently Asked Questions
Are financial advisors expensive?
Fees and costs to hire and use a financial advisor vary widely. Some advisors charge a percentage fee based on the assets under management (AUM) with their firm. If, for example, your advisor charges 0.75% of AUM per year and they manage a $200,000 portfolio for you, you would pay $1,500 per year for that service. If, in addition to the AUM fee, the advisor charges performance fees, wrap fees, surcharges, commissions, trading or other additional fees, you would pay more. Research all the fees your advisor charges by asking them and by using the SEC’s Investment Adviser Public Disclosure (IARD) website to examine the advisor’s Form ADV Part 2 Brochure.
Should a small business hire a financial advisor?
Small businesses benefit from the advice of financial advisors and financial planners as well as attorneys, and a consultation with an expert should be a first stop before you set up a new business. The choice of entity is a decision you’ll make as a business owner before you open, and that choice has ramifications down the line for your business and personal tax situation.