If you’re seeking professional help to manage your finances, you have a variety of advisers to choose from. Financial advisers offer various services, may carry a variety of certifications and operate under several different fee structures.
Here’s how to choose a financial adviser that’s appropriate for your situation.
Before you seek out a financial adviser, ask yourself what your financial goals are. If you want a financial adviser to build you a holistic financial plan that addresses every aspect of your financial life including debt management and retirement planning, you may want to seek out a certified financial planner (CFP) who can design a financial roadmap and guide you every step of the way. If you only want investment advice and portfolio management, a registered investment adviser (RIA) may be a good option. RIAs can include both human and robo-advisors.
No matter what kind of advice you need, you can typically find a financial adviser specializing in one or more of these services:
Financial adviser is an umbrella term covering many professionals that provide financial advice. CFPs, financial coaches and RIAs are different types of financial advisers. But always ask a financial adviser if they’re a fiduciary before hiring them.
Fiduciary advisers are legally required to put their client’s best interests above their own. Whether an adviser operates under the fiduciary standard often depends on their official designations.
Here are two types of financial advisers that are legally fiduciaries:
Here are two types of financial advisers that may not be fiduciaries:
Financial advice is available in many ways these days. You can get advice from an individual, a digital platform or a combination of both.
A robo-advisor is a digital platform that uses an algorithm to build and manage an investment portfolio on your behalf based on your financial goals, risk tolerance and time horizon. Advisery fees for robo-advisors tend to be less than a traditional financial adviser, but you also don’t get as comprehensive of advice.
Some firms offer suites of digital financial services alongside financial advice. For example, in addition to virtual meetings with an adviser, the financial services firm Empower offers digital tools like a dashboard to track all your financial accounts and an interactive retirement planner, as well as access to a self-directed brokerage account and portfolio management services. Meanwhile, SoFi Invest provides a no-advisery-fee robo-advisor and digital financial management tools, plus complimentary access to a CFP. Members of Facet get access to CFPs as well as financial management tools and a retirement portfolio.
Those who want face-to-face advice can always go with a traditional financial adviser. Various financial adviser marketplaces like Zoe Financial and Wealthramp can connect you to in-person financial advisers in your area based on your specific needs. The National Association of Personal Financial Advisers is also available to match you with fee-only financial advisers in your area.
Depending on their fee structures and the scope of your financial needs, financial adviser costs can vary widely. Advisers with hourly fees typically charge in the range of $120 to $300 per hour. Those charging an assets under management (AUM) fee may charge 0.5% to 2% of the assets they manage on your behalf.(3) So, an annual 0.5% AUM fee on a $20,000 portfolio would translate to a $100 fee per year.
Here’s a look at different financial adviser costs:
| Fee type | Typical cost |
|---|---|
| AUM | 0.5%–2% |
| Hourly fee | $120–$300 |
| Per-plan fee | $1,000–$3,000 |
| Commissions | 3%–6%(4) |
| Performance-based fees | 20% of the returns above benchmark |
When planning your financial future or handing off your money to be invested, it’s crucial to do your homework. Not all financial advisers are created equal, so here are a few things to consider as you search.
Before you shake on it, ask your would-be financial adviser some key questions.
Compare financial advisers by available asset types and minimum deposits. Select Go to site to sign up for an account or More Info for a comprehensive review.
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If you think you need a financial advisor, choosing the right one takes an understanding of what these different financial professionals offer, how they’re paid and whether they’re legally obligated to act in your best interest.
One effective way is to use an online marketplace that connects you to fiduciary financial advisers.
Knowing which financial adviser to use depends on the kinds of services you need. So, ask if they specialize in those areas and verify their credentials.
Look for the following seven things in a financial adviser:
Anyone with a need for financial guidance can consider a financial adviser. Some wealth management firms have investment minimums of $1 million, and some robo-advisors have no investment minimums. Compare minimum asset requirements across advisers.
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