Do I Need a Financial Advisor?

Financial advisors can assist their clients with their finances in a number of ways. In fact, they often specialize in some combination of investment management, financial planning, retirement planning, estate planning, tax minimization and more. This makes them especially valuable for those with specific financial goals in mind. But because there are so many different types of financial advisors, you’ll have many options to explore.

A financial advisor can help you with a range of services including retirement planning, debt consolidation, and more.

Why You May Want to Consider Working With a Financial Advisor

Many financial matters you and your family may come across can be quite complex. This could involve building an investment portfolio, preparing for retirement, protecting your estate so you can pass it on to your children, and more. Managing all of this on your own can be time-consuming and tough to learn.

A financial advisor can help you make sense of many different types of financial topics and issues. Financial advisors can holistically examine your financial situation and help you craft a financial plan. This helps ensure you make decisions that are in line with your larger goals. This type of expert advice can help you be sure you’ll get to retire when you want.

Financial advisors can also help you seek to maximize your investment returns through precise decision-making and market analysis. They often start by creating an asset allocation that fits with your goals. Together, you’ll adjust your asset allocation as you get older or your goals change. At the same time, financial advisors can help you protect your assets, which becomes especially important as you near retirement.

Wondering if a financial advisor is worth the cost? Our Financial Advisor Value Calculator shows how their advice could affect your net worth prospects over time:

Do You Really Need a Financial Advisor?

Hiring a financial advisor isn’t always a necessity, but not working with one could lead to missed opportunities, or even regrets.

If you lack the expertise or knowledge to navigate financial decisions effectively, a financial advisor can make a significant difference in helping you achieve your desired returns. These professionals not only manage your assets but also assist in crafting strategies to meet your long-term financial goals. When an advisor does their job well, the value they bring can far exceed the cost of their services.

There’s no universal milestone, whether it’s age, career stage or income level, that signals when you should hire a financial advisor. However, if your financial situation has grown more complex than simply managing paychecks and expenses, it may be time to consider one. Keep in mind that many advisors have minimum investment requirements, so it’s important to find someone whose services align with your current financial circumstances.

Major life transitions are another key moment to seek the guidance of a financial advisor. Events like starting a family, receiving an inheritance or going through a divorce often bring new financial challenges and opportunities. For example, if you have children, you may want to begin planning for their college education or creating a plan to leave them an inheritance. A skilled financial advisor can help you navigate these situations and ensure your plans are on the right track.

What Type of Financial Advisor Do I Need?

There are three basic types of financial advisors: asset managers, financial planners and wealth managers. If all you want is someone to help you with investments in stocks, bonds, ETFs or other securities, an asset manager is the choice for you. They will work with you to build a portfolio that aligns with your financial goals, risk tolerance and time horizon.

If you’re looking to set yourself on track to reach a financial goal down the line, a financial planner can help. They tend to have specific specializations, like taxes, retirement, estate planning, college planning and more. Planners often hold other titles as well, like accountants, retirement advisors, estate planning attorneys and more.

Wealth managers, on the other hand, are better for those seeking a broader plan for their finances. In addition to helping you build your portfolio and a financial plan, a wealth manager will consider your overall financial health and take steps to protect your assets over the long term. They can also help with things like tax planning, estate planning, education savings and charitable giving.

Fees

Many financial advisors serve as both asset managers and wealth managers, combining financial planning with investment management to offer a full range of services. They may operate under different compensation models, including fee-only and fee-based, or commission-based structures.

Investors generally prefer fee-only, as these advisors avoid all outside commissions for things like insurance and securities sales. Conversely, fee-based advisors dual register as insurance agents and/or broker-dealers, allowing them to accept these commissions in addition to the fees clients pay them. While this could cause a potential conflict of interest, all SEC-registered advisors act as fiduciaries, putting clients’ interests ahead of their own.

Outside of a traditional financial advisor, you may also want to look into robo-advisors or online advisory services. As you might expect, a robo-advisor manages your money in an automated manner, with algorithms running your portfolio based on your investor profile. An online advisory service is closer to a normal advisor, only your relationship with them is exclusively remote.

How to Find and Hire a Financial Advisor

There are a number of ways to find a financial advisor. One of the easiest options for choosing one is SmartAsset’s free financial advisor matching tool. In a matter of minutes, you’ll match with up to three financial advisors who serve your area. Then, you’ll have the opportunity to interview these advisors, with the final choice of who you want to work with being entirely up to you.

In today’s day and age, there are a number of online resources you can use to learn about financial advisors. SmartAsset is a great place to start your search. To find top advisors in your area, visit one of our many top financial advisor lists for cities and states across the U.S.

Another tried-and-true method for finding an advisor is to ask family and friends for recommendations. However, they may have very different needs and goals than you. For instance, let’s say you find a financial advisor through your parents. The problem with this is that the needs of a 30-year-old are likely to be much different from those of a couple in their 50s or 60s. So if you choose to accept advice from a friend or relative, make sure the advisor can meet your needs.

Once you home in on an advisor you think is a good match, you’ll want to personally speak with them. This is most often done through an in-person meeting, as it lets you get fully acquainted. Feel free to ask the advisor plenty of questions during this meeting. After all, they’re going to be largely responsible for managing your finances.

What to Expect Once You Hire a Financial Advisor

Once you finally hire a financial advisor, the real work begins. First and foremost, you’ll want to make your advisor aware of any financial matters that relate to what they’ll be doing for you. This could include turning over tax returns, discussing your goals for the future, detailing the size and contents of your investment accounts and more.

Next, they typically have some kind of questionnaire for you. This will help the advisor find out more about you as an investor, which are insights that will inform their decisions. For example, your proximity to retirement is extremely important, as are your income needs. In the end, the advisor will try to determine a few key factors: risk tolerance, time horizon, liquidity needs, long-term financial goals and investment preferences.

After your advisor invests your money and creates your financial plan, things will likely shift to maintenance. You’ll of course need to check in with them regularly, though, to keep them fully apprised. You should also alert your advisor whenever your plans for the future change. The sooner you do that, the sooner they can begin adjusting your investments and plans.

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How Much Does a Financial Advisor Cost?

What you pay depends on how the advisor gets paid. There are four common models, and each one affects your total cost differently:

• Assets under management (AUM): You pay a percentage of whatever the advisor manages for you, billed annually. The percentage shrinks as your assets under management grow. Industry fee surveys show that smaller accounts tend to pay north of 1% per year, while accounts above $1 million often pay closer to the 1% mark or just above it. Fee data published by Kitces Research found that most advisors with accounts under $1 million charge somewhere between 1.00% and 1.20%, with that number falling once assets cross $2 million. ¹
• Flat fee: You pay a fixed dollar amount each year regardless of how much you have invested. Kitces Research puts the middle of the range at roughly $4,500 annually for ongoing planning, though fees vary widely based on the work involved. This structure removes the link between your portfolio size and what the advisor earns.
• Hourly rate: You pay only for the time you use. Kitces Research reports a typical rate around $300 per hour. This can work well for a single financial question or a one-time plan rather than an ongoing relationship.
• Commission-based: The advisor earns money when you purchase a product like an annuity, life insurance policy or certain mutual fund. You do not pay the advisor directly, but the commission is baked into the product cost. This creates an incentive for the advisor to recommend products that pay them more, which is why fee-only advisors who do not accept commissions are generally preferred.

Before hiring, ask whether the fee covers just investment management or also includes planning, tax work and reporting. Two advisors charging the same percentage can deliver very different levels of service.

Questions to Ask a Financial Advisor Before You Hire One

Before committing to an advisor, ask these questions during your initial meeting or introductory call:

• Are you a fiduciary at all times? A fiduciary is legally required to act in your best interest. Some advisors operate as fiduciaries only when providing certain types of advice, so it is important to confirm this applies to everything they do for you.
• How are you compensated? Ask whether they charge AUM fees, flat fees, hourly rates or commissions, and whether they receive any additional compensation from fund companies or product providers.
• What services are included in your fee? Some advisors include financial planning, tax strategy and estate planning in their AUM fee. Others charge separately for each service.
• What is your investment philosophy? Ask how they build portfolios, what benchmarks they use and how often they rebalance. Make sure their approach fits with your goals and risk tolerance.
• Who will I actually be working with? At larger firms, the person you meet during the sales process may not be the person managing your account day to day. Ask who your primary contact will be and whether that person makes the investment decisions.
• How often will we meet? Some advisors meet with clients quarterly, others annually. Make sure the level of communication fits your expectations.
• What is your typical client profile? An advisor who primarily works with retirees may not be the best fit for a 35-year-old business owner. Look for someone whose experience matches your financial situation.

How to Verify a Financial Advisor’s Background

Before hiring any advisor, check their registration, credentials, and disciplinary history using free public databases:

• SEC Investment Adviser Public Disclosure (IAPD) at adviserinfo.sec.gov: This database shows whether an advisor or firm is registered, how they are compensated, how much they manage and whether they have any disciplinary history. Every SEC-registered advisor is required to file a Form ADV, which is the primary disclosure document for investment advisory firms.
• FINRA BrokerCheck at brokercheck.finra.org: If the advisor also holds a securities license or is affiliated with a broker-dealer, BrokerCheck shows their employment history, qualifications, regulatory actions and customer complaints.
• State securities regulators: Advisors managing less than $100 million are typically registered at the state level rather than with the SEC. Your state’s securities regulator may have additional information not available through federal databases.

Take a few minutes to run these checks before your first meeting. A clean record does not guarantee a good fit, but a disciplinary history is a clear reason to look elsewhere.

What Credentials to Look For

Financial advisor credentials vary widely. Some designations require rigorous education, exams and ongoing ethics requirements, while others involve minimal coursework. Here are the credentials that carry the most weight:

• Certified Financial Planner™ (CFP®): Covers financial planning broadly, including retirement, tax, estate and insurance planning. Requires a bachelor’s degree, completion of a CFP® Board-registered education program, passing a comprehensive exam, 6,000 hours of professional experience (or 4,000 hours in an apprenticeship) and ongoing continuing education. CFP® professionals are held to a fiduciary standard when providing financial advice.
• Chartered Financial Analyst (CFA): Focused on investment analysis and portfolio management. Requires passing three progressively difficult exams over a minimum of two and a half years, plus at least 4,000 hours of relevant professional experience. The CFA designation is most common among advisors focused on investment management rather than broad financial planning.
• Certified Public Accountant (CPA): Indicates expertise in tax and accounting. Some CPAs who also hold the Personal Financial Specialist (PFS) credential provide financial planning alongside tax services.
• Certified Private Wealth Advisor® (CPWA®): Designed for advisors working with high-net-worth clients. Covers advanced wealth management topics including tax planning, estate planning, behavioral finance and asset protection.

Not every good advisor holds a designation, and holding one does not guarantee quality. But these credentials signal that the advisor has met specific education and experience requirements and is subject to ongoing ethical standards.

Red Flags to Watch For

Not every advisor operates in your best interest. Watch for these warning signs before and after hiring:

• Guaranteed returns. No legitimate advisor can guarantee investment performance. Markets carry risk, and anyone promising specific returns is either misleading you or does not understand the products they are selling.
• Pressure to act quickly. If an advisor pushes you to sign an agreement, transfer funds, or purchase a product before you have had time to review the terms, that is a sign they are prioritizing their own timeline over yours.
• Lack of fee transparency. If an advisor cannot clearly explain how they are compensated or avoids direct questions about fees, that is a reason to walk away. You should know exactly what you are paying and for what before signing anything.
• No written agreement. A legitimate advisory relationship starts with a written agreement that outlines services, fees, responsibilities and how either party can end the relationship. If an advisor is willing to manage your money without one, that is a serious concern.
• Reluctance to provide credentials or registration information. Any advisor should be willing to share their Form ADV, CRD number and credentials. If they are evasive about their background, check the public databases yourself or move on.
• Unsolicited contact. Be cautious of advisors who reach out to you unprompted, especially through cold calls, social media messages or high-pressure seminars. Reputable advisors typically do not need to chase clients.

Bottom Line

Whether you need a financial advisor depends on the complexity of your finances, your confidence in managing money and the goals you’re working toward. An advisor can provide value through personalized planning, objective guidance, and help navigating major life or financial decisions. Weighing the cost of advice against the potential benefits can help you decide if professional support makes sense for your situation.

Tips for Finding a Financial Advisor

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Before you hire a financial advisor, it’s important to understand how much their services will cost. Most advisors charge a percentage of your assets under management, though you may also incur other fees.

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