How to choose a financial advisor   

How do I establish my financial goals?

If you’re able to afford financial advice that can put you in a better position for the future, then all the better.

But before you embark on a hunt for the perfect financial advisor, ask yourself: what are your long-term goals? And which part of your financial life do you need help with? 

If you’re at the start of your financial journey, you may not need comprehensive advice.

Young people who are not saddled with significant debt, or don’t have families or a mortgage, may just be interested in how best they can start saving to build up an emergency fund or afford to get on the property ladder.

However, others may be looking at planning for retirement, repaying debt, estate planning or looking for insurance product suggestions.

Whatever you need help with, a financial advisor will be on hand to support you – and the best out there will be the ones who can help you plan out your path to a secure financial future.  

What service are you looking for?

Faced with a huge choice in the financial advice market, there are plenty of things to consider before taking your pick.

Alongside factors like cost and how much capital you have to invest, it can be helpful to know what sort of service you’ll be seeking out.

This can include: 

• Retirement planning specialists, to support you with life after work 

• Wealth planners, who specialize in the needs of clients with more wealth. They will usually require clients to have at least $1 million in assets 

• Estate planners, who will help prepare your estate for your beneficiaries 

• Certified divorce financial analysts (CDFA), to help you during and after divorce 

• Certified exit planners (CExP), who help business owners sell or exit a business 

There is no federal law that regulates who can call themselves a financial advisor, or provide financial advice, so ensuring you’re aware of fiduciary duty can be key to finding an advisor who has your best interests at heart.

Some financial advisors are legally bound by fiduciary duty, meaning that they are required to work only with your financial interest in mind.

When you’re digging for a financial advisor, one thing to research is how they make their money; are they fee-based, or do they work on commission?  

What types of financial advisors are available?

You may be looking for a broad range of advice that covers more than one of the services above.

Or, you may be looking for something different altogether. But when picking one of the types of financial advisors below, it’s worth thinking about what you’re looking to get from them, both in terms of the service and the relationship.  

Traditional financial advisors 

If you want to build up a relationship with a financial advisor who will drill down into your financial situation and your long-term goals before offering advice and planning support, then a traditional financial advisor is the way to go.

They are also likely to have access to an expert team of financial specialists that they can call upon for additional support if required, and so will be very well informed on all areas of financial planning, from retirement to debt consolidation.  

Traditional financial advice will come from both fee-only and commission-based professionals.

The former will see your advisor earn money from a percentage of the assets they manage for you, as an hourly rate or a flat rate, and will likely be fiduciaries.

The latter will make money by earning sales commissions from third parties and won’t charge you a fee for advice.

Commission-based advisors aren’t bad in themselves, and they offer benefits of their own — just make sure you do your research first.  

Robo-advisors 

A cheaper and simplified version of the real thing, robo-advisors are a low-cost investment management tool that will algorithmically process the answers you give to a number of questions, before building an (often preconstructed) investment portfolio for you based on things like your long-term goals and risk tolerance.

While this won’t give you the bespoke financial advice service that you’d receive from a traditional advisor, it will be significantly less expensive and can help you towards mid-to-long-term goals like retirement.

If you have complex financial needs though, there will be limitations to what robo-advisors can offer you.  

Hybrid advisors 

If you’re looking for the best of both worlds, a hybrid advisor could be just the ticket.

You’ll have access to a cheap and automated investment platform, but with the added option of access to human advisors who can offer advice on more complex financial situations.

So, if you feel like you’re not at a level that requires a traditional advisor, but you need more than an automated algorithm to help you in your financial endeavors, then this could be a winning solution.  

How do I find the right financial advisor?

A good relationship with your financial advisor is crucial.

You want them to understand exactly what the end goal is, and a good advisor will know exactly the sort of investor you are and how best they can make your finances work for you.

But be sure to check them out online before doing any digging.