Choosing someone to guide your financial future is not something to rush. A good advisor can help you manage investments, plan for retirement, reduce taxes, and make decisions that support your goals. Choosing the wrong advisor can drain your finances and waste valuable time. Learning how to find a good financial advisor starts with the right questions.
1. Are You a Fiduciary?
The first thing to clarify is whether the advisor will act as a fiduciary. A fiduciary is bound to prioritize your interests over theirs. They must disclose any conflicts and recommend the options that best fit your needs. Some advisors only follow a suitability standard, meaning their advice needs to be appropriate, but not necessarily the best choice for you.
2. How Do You Get Paid?
Understanding payment structure is essential when figuring out what to look for in a financial advisor. Advisors may be fee-only, fee-based, or commission-based. Fee-only means they are paid directly by you and do not earn commissions from selling products. Fee-based advisors get paid through a mix of client fees and commissions. Commission-based advisors make money by selling specific financial products, which can sometimes create conflicts between their earnings and your best interests. Ask about all fees, including percentages of assets under management, flat fees, hourly rates, and any hidden charges.
3. What Services Do You Offer?
Financial advisors can provide different services, from investment management to retirement planning. Some focus on budgeting, debt management, tax planning, or estate planning. Others specialize in helping with specific goals, such as saving for a home or managing an inheritance. Knowing their scope of services ensures they can address your needs. If you need a comprehensive plan, make sure they do more than just manage investments.
4. What Credentials Do You Hold?
When getting a financial advisor, consider respected credentials like Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These titles reflect rigorous education, testing, and ethical requirements. You can confirm them through the CFP Board or CFA Institute websites. While they don’t ensure honesty, they signal strong professional expertise.
5. What Kind of Clients Do You Usually Work With?
Advisors often cater to specific client groups. Some work with high-net-worth individuals, while others guide those still building wealth. Ask about their experience with clients similar to your situation. For instance, someone approaching retirement may benefit from an advisor skilled in income planning, while younger clients might prefer one focused on long-term investing and managing debt.
6. Do You Have Account Minimums?
Certain firms set minimum asset requirements, which may range from just a few thousand dollars to several hundred thousand. If you are just starting, you may not meet certain thresholds for traditional wealth management services. In that case, you could consider online financial advisors or robo-advisors, which often have lower or no minimums.
7. How Will We Communicate and How Often?
When deciding how to hire a financial advisor, think about how you want to communicate. Some prefer meeting in person, while others are comfortable with phone or video chats. Find out how frequently they will update and review your financial plan. Ongoing communication helps keep your strategy aligned with any changes in your goals or circumstances.
8. Will You Work With My Other Advisors?
If you have a CPA, attorney, or insurance agent, it helps when your financial advisor can coordinate with them. This teamwork makes sure your tax strategies, estate planning, and investment decisions work together. Ask if they are willing to collaborate with other professionals on your behalf.
9. What Is Your Investment Philosophy?
An advisor’s investment approach should align with your goals and risk tolerance. Some take an aggressive growth strategy, while others focus on steady income or capital preservation. Ask how they select investments and how they handle market downturns. Understanding their philosophy will help you feel confident about how your money is managed.
10. Can I See Your Regulatory Record?
Before getting a financial advisor, check their background through FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure database. These resources show employment history, licenses, and any disciplinary actions. Even a skilled advisor with great recommendations should have a clean record.
Advisor Types and Costs
Financial advisors come in different forms. Traditional advisors often charge around 1 percent of assets under management. Fee-only advisors may charge hourly rates averaging $268 or flat fees around $2,500. Robo-advisors are automated platforms that can cost as little as 0.25 percent annually and are best for simpler financial situations. Some online advisors combine automation with access to human professionals for an in-between option.
Red Flags to Watch Out For
While learning how to find a good financial advisor, be alert for warning signs. Avoid those who dodge questions about fees or hesitate to confirm fiduciary status. Be cautious with advisors who push specific products too quickly or guarantee unrealistic returns. A trustworthy professional will explain recommendations clearly and welcome your questions.
Making Your Decision
Once you have interviewed a few advisors, compare their answers. Look for transparency, relevant experience, and an approach that matches your financial personality. A good advisor will listen, explain complex topics in plain language, and focus on your needs rather than selling products.
The Smartest Investment Is Choosing the Right Partner
Your financial future depends not only on the markets but also on the person guiding your decisions. Taking time to ask these 10 questions can save you from costly mistakes and help you build a relationship based on trust. The right advisor will be a partner in achieving your financial goals.