Not everyone needs a financial advisor. 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 advisor.
When do I need a financial advisor?
Before you hire a financial advisor, 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 advisor could serve as a solid ally. But to find the right financial advisor, you need to know what financial advisors do and how they operate.
What does a financial advisor do?
“Financial advisor” 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:
Budgeting and savings
Debt management
Investing
Retirement planning
Insurance planning
Home buying
Saving for college
Tax management
Estate planning
Wealth management
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 advisor,” said Bryan Stiger, CFP, Senior Financial Planner at Betterment. “The more relevant question is ‘what kind of financial advisor do I need?'”
Automated investment management with human advisor support
All-index, active/index mix and ESG investment options
Taxable accounts and IRAs available
Types of financial advisors
Financial advisors come in many forms. Here are some common titles you may encounter:
Certified financial planners (CFPs). Professionals who take a holistic view of a client’s financial situation and draw a roadmap to help them meet their short- and long-term financial goals. CFPs are fiduciaries, meaning they are legally obligated to always provide advice in your best interest.
Registered investment advisors (RIA). Companies or individuals that provide investment advice and portfolio management services as fiduciaries.
Robo-advisors. Automated investing platforms that recommend and manage portfolios on behalf of clients, robo-advisors typically cost a fraction of the price of human advisors, but the advisory services may not be as comprehensive.
Broker-dealers. Companies or individuals specializing in buying and selling securities like stocks, bonds and mutual funds on behalf of their customers as brokers or for the firm’s accounts.
Wealth managers. These professionals often work with high-net-worth clients and provide holistic financial plans addressing matters like estate planning, charitable giving and tax management.
How much money do I need for a financial advisor?
Different financial advisors 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 advisor to make sense.
As far as fees you can expect to pay, the costs of a financial advisor vary depending on their fee structure and the scope of the services you need. Here’s a glimpse of average financial advisor costs by fee structure.
Financial advisors are worth it if they help you meet your needs. If you hired a financial advisor 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 advisors 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.
Financial advisor vs. financial planner
A financial advisor 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 advisors also build financial plans for their clients.
Where to find a financial advisor
Online marketplaces and databases can connect you to financial advisors. The National Association of Personal Financial Advisors (NAPFA) can connect you with fee-only fiduciary financial planners in your area. Fee-only means these advisors 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 advisor marketplaces, like Zoe Financial and Wealthramp, can also connect you with fiduciary financial advisors in your area.
Compare financial advisors
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Bottom line
Anyone who needs professional help with money management or a roadmap to reach financial goals like saving for retirement can benefit from a financial advisor. But it’s crucial to know what kind of financial advisor you need and to verify their credentials and fiduciary status.
Frequently asked questions
Is it really worth it to have a financial advisor?
If you want help managing your money or guidance on your entire financial life, a financial advisor can be worth it. But you have to do your due diligence to find one that can meet your needs.
How do you know if you need a financial advisor?
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 advisor.
At what net worth should I get a financial advisor?
If you have between $50,000 and $1,000,000, consider a financial advisor to assist with money management(2). But financial advisors are more than just money managers. They can help with various tasks like retirement planning, saving for a child’s college education and homebuying.
How much do you pay a financial advisor?
Financial advisor 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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Written by
Javier Simon
Javier Simon is a freelance finance writer at Finder and a certified educator in personal finance (CEPF).
He’s featured on NerdWallet, Bankrate, Yahoo Finance and Fox Business, where he’s shared his expertise on personal finance topics, such as investing, retirement planning, taxes, budgeting and savings.
He has also covered breaking news, such as student loan forgiveness initiatives, the housing market and inflation’s impact on consumers’ wallets.
His passion is turning complex financial concepts into actionable content that can help people improve their financial lives.
Javier holds a bachelor’s degree in multimedia journalism from SUNY Plattsburgh. See full profile
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