Not everyone needs a financial adviser. Depending on the complexity of your situation, you may be able to manage your own finances. But if your finances have reached a level of complexity that you can’t handle or you simply want professional help with your short- or long-term financial goals like investing, optimizing taxes or saving for retirement, you might benefit from the help of a financial adviser.
Before you hire a financial adviser, examine your financial situation and assess your expertise to see if it’s a task you can handle on your own. Plenty of free tools, apps and online content are available that can help you complete tasks like creating a budget, tracking your spending and coming up with a plan to pay off debt or build up an emergency fund.
But everyone needs a helping hand sometimes. Maybe you don’t have the time to manage your money properly or your financial situation is particularly overwhelming. Perhaps you want to start saving for retirement but don’t know anything about investing. Or you want to buy a house but are not sure how to get a mortgage. Maybe you want to save for your child’s college education, and student debt headlines have you sweating.
In dealing with such financial challenges, a financial adviser could serve as a solid ally. But to find the right financial adviser, you need to know what financial advisers do and how they operate.
“Financial adviser” is a broad term referring to any professional offering guidance and advice on meeting financial goals. They may offer advice on one or more of the following:
Because the financial services industry is so wide, it’s important to ask yourself what kind of financial advice you need and who can provide it — effectively and ethically.
“Almost everyone can benefit from using a financial adviser,” said Bryan Stiger, CFP, Senior Financial Planner at Betterment. “The more relevant question is ‘what kind of financial adviser do I need?'”
Financial advisers come in many forms. Here are some common titles you may encounter:
Different financial advisers may have different minimums for their services. For instance, an investment advisor may require clients have a minimum portfolio amount. However, there’s no one minimum amount needed for a financial adviser to make sense.
As far as fees you can expect to pay, the costs of a financial adviser vary depending on their fee structure and the scope of the services you need. Here’s a glimpse of average financial adviser costs by fee structure.
| Fee type | Typical cost |
|---|---|
| Assets under management (AUM) | 0.5%–2% |
| Hourly fee | $120–$300 |
| Per-plan fee | $1,000–$3,000 (1) |
| Commissions | 3%–6% |
| Performance-based fees | 20% of the returns above benchmark |
Financial advisers are worth it if they help you meet your needs. If you hired a financial adviser to help you invest and your returns are substantial, then even a 0.5% AUM fee may be worth it. And if a financial planner successfully helps you meet your goals and maintain financial wellness, the cost may be worth it, too.
But this isn’t always the case. There are nefarious actors in the financial services industry as in any other field. This is why it’s important to vet financial advisers and verify their credentials before hiring them.
“Check certifications, educational background and years of experience in the field,” Stiger says.
Verify the status of investment professionals by visiting FINRA Broker Check. And you can check the CFP Board to confirm a CFP professional.
A financial adviser is an umbrella term covering various financial professionals who offer advice. These individuals or companies may provide specific services like investment advice, portfolio management, estate planning and tax management.
Financial planners are a type of financial advisor who take a big-picture look at your financial situation and design a strategy to help you meet financial goals. These can be short-term, like building an emergency fund and sticking to a budget, or long-term, like retirement planning and estate planning.
Still, there are crossroads between the two. Many financial planners, including CFPs, are also registered and licensed to provide investment advice. And many investment advisers also build financial plans for their clients.
Online marketplaces and databases can connect you to financial advisers. The National Association of Personal Financial Advisors (NAPFA) can connect you with fee-only fiduciary financial planners in your area. Fee-only means these advisers only charge fees for their financial planning services. They don’t earn commissions by selling you financial products like investments from third-party companies.
The online financial adviser marketplaces, like Zoe Financial and Wealthramp, can also connect you with fiduciary financial advisers in your area.
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Anyone who needs professional help with money management or a roadmap to reach financial goals like saving for retirement can benefit from a financial adviser. But it’s crucial to know what kind of financial adviser you need and to verify their credentials and fiduciary status.
If you want help managing your money or guidance on your entire financial life, a financial adviser can be worth it. But you have to do your due diligence to find one that can meet your needs.
If you don’t have time to manage your finances effectively or you’ve reached a life milestone like marriage or the birth of a child, you may want to consider a financial adviser.
If you have between $50,000 and $1,000,000, consider a financial adviser to assist with money management(2). But financial advisers are more than just money managers. They can help with various tasks like retirement planning, saving for a child’s college education and homebuying.
Financial adviser costs vary by fee structure and the complexity of services provided. Some charge assets under management (AUM) fees that can range from 0.5% to 2%, and some charge hourly rates for financial planning services that can range from $120 to $300.
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