financial advisor 2025

1. What Financial Services Do You Need?

2. Understand Different Types of Advisors

3. Decide What You’re Willing to Pay

4. Finding Financial Advisors

5. Vetting Financial Advisors

6. Final Steps to Financial Partnership

7. Frequently Asked Questions (FAQs)

Step 1: Determine What Financial Services You Need

You should begin your search for a financial advisor (often spelled “financial adviser”) by asking yourself, “What do you need help with?”

There are hundreds of advisors in the financial advising sector who provide a wide range of services. While some specialize in retirement or investment management, others concentrate on comprehensive financial planning.

Many labor to satisfy the demands of certain clients, such as business owners or high-net-worth people. Finding the right counsel requires knowing what you need.

A financial advisor can assist you in the following typical areas of need:

Portfolio management: An advisor oversees a retirement account or investment portfolio based on the client’s risk tolerance, time horizon, and other considerations.
Retirement planning: An advisor creates a retirement financial plan that usually addresses income, investments, taxes, and other areas.
Financial consulting: An advisor can assist with inquiries on many aspects of financial planning.
Estate planning: Advisors assist clients in creating plans for their estates, which may include wills, trusts, charitable contributions, and other documents.
Tax planning: Advisors assist clients in creating strategies to reduce their taxes both now and in the future.
Analysis of insurance needs: Advisors collaborate with clients to pinpoint areas in which insurance may be beneficial.
Education planning: Advisors help customers save for their children’s or grandchildren’s education by utilizing tools such as 529 plans.
Planning for business succession: Advisors assist entrepreneurs in creating a financial strategy for either selling their company or transferring it to their descendants.

According to Kristin McKenna, managing director of Boston’s Darrow Wealth Management, clients should prioritize selecting an advisor who can meet their needs over one who lives nearby.

Working with an advisor who specializes in that particular area may be more beneficial for investors with complex or nuanced situations.

Step 2: Understand What a Financial Advisor Is

A financial advisor is a professional who helps clients make decisions about many aspects of their financial lives.

A financial advisor can provide advice on retirement estimates, tax preparation, and investment management.

The phrase “financial advisor” was used to refer to a variety of jobs in the financial sector until recently. But according to a new U.S.

Only a select few are permitted to use the Securities and Exchange Commission’s (SEC) Regulation Best Interest (Reg BI) moniker. Typically, registered investment advisors (RIAs) or investment advisor representatives are also financial advisors.

Conversely, broker-dealers will typically breach the Reg BI capacity disclosure requirement if they include these phrases in their names or titles when offering investment advice to a retail client.
Generally speaking, the disclosure requirement relates to regulations that mandate advisors properly notify clients of the terms and extent of their connection and significant information regarding conflicts of interest when recommending a course of action.

A Registered Investment Adviser (RIA): What Is It?

This legal designation refers to an individual or business that is registered as an investment advisor with the SEC or a state securities regulator. Government organizations sometimes spell it with an ” e.”

Describe a fiduciary.

Any advisor who is registered with the SEC is legally obligated to uphold fiduciary duty, which means they must prioritize the interests of their clients over their own.

The SEC states that fiduciaries are “held to the highest standard of conduct” since they are required to uphold a responsibility of care and devotion to their clients.

However, when broker-dealers and related individuals recommend any securities transaction or investment strategy to a retail customer, including account types, they are subject to the Securities Exchange Act of 1934’sAny advisor who is registered with the SEC is legally obligated to uphold fiduciary duty, which means they must prioritize the interests of their clients over their own. The SEC states that fiduciaries are “held to the highest standard of conduct” since they are required to uphold a responsibility of care and devotion to their clients.

You can be sure that an advisor who upholds fiduciary obligation is legally required to prioritize your interests. You can feel more at ease knowing that a fiduciary has a responsibility of trust and commitment to you, the customer, even though they may still have conflicts of interest.

For this reason, when you first meet with an advisor, the majority of professionals advise you to question them if they adhere to fiduciary obligations. Additionally, you can use a service like the free matching tool offered by SmartAsset, which connects potential customers with fiduciary financial advisors.

For this reason, when you first meet with an advisor, the majority of professionals advise you to question them if they adhere to fiduciary obligations. You might also make use of a service such as SmartAsset’s free matching tool, which links prospective clients with fiduciary financial advisors.

Typical Financial Advisor Types

One of the many ways that financial advisors differ from one another is whether or not they are fiduciaries.

The following lists some of the most popular categories of financial advisors who could be able to provide you with the services you require:

Managers of investments:

Managing client portfolios and providing investment advice are the main responsibilities of these advisors.

Investment managers frequently work with or are themselves registered investment advisors (RIAs).RIAs must register with the SEC and adhere to fiduciary duties.

Planners of finances:

If you want financial guidance that goes beyond investing, consult a financial advisor. Financial planning entails assessing your current financial situation and developing a thorough plan to meet your immediate and long-term goals.

Financial planners strive to offer comprehensive guidance that addresses a person’s retirement requirements, cash flow and budgeting, estate planning, insurance, and other topics. Additionally, they could concentrate on only one or two particular regions.

Managers of wealth:

While some advisers specialize in wealth management, a more comprehensive service that unifies financial planning and investment management under one roof, some investment managers also provide financial planning services.

Robotic advisors:

Do you not believe that a human advisor’s personal touch is necessary? Platforms known as robo-advisors use risk-based algorithms to manage your investing portfolio digitally.

They adjust your holdings over time and automatically generate asset allocations based on your investor profile. Although some companies include additional human advisors in their packages, robo-advisors do not require human participation like traditional advisors do. Investors who don’t satisfy the account minimums that human advisors frequently require may find these platforms a choice because they frequently have reduced fees.

Setting your financial goals in motion can be greatly aided by selecting the appropriate kind of financial expert. After deciding what kind of advisor you require, you can proceed to figure out how to get the best expert and how much you are prepared to spend on their services.

Step 3: Establish Your Price Range for the Services of a Financial Advisor

Financial advisors charge for their services, though the exact costs you pay will vary depending on the services you receive.
While investment management may include a fee based on a percentage of the overall amount of assets you’re investing with the advisor, financial consulting, for instance, is usually billed on an hourly basis.

Below, we examine in more detail the most typical fee structures for financial advisors.

AUM-based charges:

One typical method of payment for investment management is fees, which are calculated as a percentage of your assets under management (AUM). For instance, depending on how frequently you receive bills and how your account develops over the year, you may have to pay $5,000 in fees if your advisor charges a 1% annual fee and you have $500,000 invested.

Additionally, these fee systems typically consist of levels, with prices decreasing with increasing investment. In reality, a 2022 Kitces.com poll of around 800 financial advisors found that 59% of advisors that charge AUM fees employ a progressive rate scheme.

Ongoing financial planning and asset management are two aspects of the full wealth management services that some businesses and individual consultants may provide. A portion of your AUM may also be used to calculate your wealth management charge.

Fixed costs:

Many advisors offer standalone or project-based financial planning services.For a fixed cost, these offers enable customers to obtain specialized, focused services. For a set price, standalone financial planning is frequently provided.

Hourly rates:

Similar to standalone financial planning, which is offered for a set cost, several advisors offer financial planning services on an hourly basis. Once more, your advisory agreement will specify such a rate in advance. According to the same Kitces poll from 2022, half of the respondents’ hourly fees fell between $223 and $300.

Fees for retainers:

Some advisory firms charge monthly membership fees in addition to annual or quarterly retainers. Although this price structure is becoming more popular, it is not as frequent as the three above. According to the 2022 Kitces poll, only 3% of advisors rely only on retainer fees, whereas 39% charge them.

However, what is the approximate cost of each type of fee? Although adviser fees vary greatly, the following is a general guideline:

Median Financial Advisor Fees by Type
Fee Type	Median Fee
AUM	0.59% – 1.18%^*
Standalone Fixed	$3,000^**
Hourly	$250^**
Retainer	$3,000^**
* According to Advisory HQ, 2023 ** According to The Kitces Report “How Actual Financial Planners Do Financial Planning (2022)”

However, these costs probably won’t be the only ones you pay. Additionally, some financial advisors will pass on fees from outside firms that assist your advisor in making investments.

Additionally, you will probably be liable for any trading expenses your advisor incurs while transferring your funds between investments. Before proceeding, it’s crucial to confirm that you comprehend all of the costs associated with your investments and the services you’re getting.

The values above are merely examples of financial advisors’ typical fees and structures. You might be paired with advisors who have collaborated with SmartAsset, and their costs might be greater than those shown above.

Please review your investment advisor’s Form ADV and CRS, as well as the fee arrangements, in detail.

Comparing Fee-Based and Fee-Only Financial Advisors

Another contrast that may be brought up when talking about fee structures is fee-only vs. fee-based advisers. You must comprehend the significant distinctions between these pricing arrangements while looking for an advisor. The main distinctions are as follows:

Fee-only:

Client fees are the only source of revenue for a fee-only advisor.This implies that they are not paid commissions or in any other way when a client chooses a certain investment or purchases a certain financial product.

This helps guarantee that advisors are only focused on giving their customers the best advice possible by eliminating most incentives for them to promote particular items.

Fee-based:

On the other hand, if a fee-based advisor is a dual registrant and fully discloses their function to the client, they may be able to earn third-party commissions in addition to the advising fees that customers pay.

These commissions frequently result from the sale or recommendation of investments, insurance, annuities, and financial goods to customers. Fee-based advisers have a relationship through which they can obtain this extra remuneration because they are frequently also licensed broker-dealers and/or insurance agents.

Potential conflicts of interest may arise from sales commissions and other third-party income, though any such conflicts would have to be declared.
Fee-based advisors are obligated to act in the best interests of their clients.

Many people restrict their search to fee-only advisors because of this significant difference. However, depending on the services you’re receiving, this might not be as important as you believe.

According to Michael McDaid, a CFP® at RetirementDNA in Escondido, California, “as long as they are acting as a fiduciary and disclosing potential conflicts of interest, commission-based advisors are not necessarily a bad thing.”

Remember that a fiduciary advisor has a fiduciary duty regardless of the kind of advisor you select. It’s best to find out the advisor’s function when making specific advice, though, if you’re working with a dual registrant fee-based advisor.

Minimum Sums of Investment

Be aware of any minimum investment criteria that a firm may set before deciding on a financial advisor. Tens of millions of dollars may be required as a minimum investment or as little as a few thousand dollars. Certain companies could additionally demand that their clients maintain a specific amount of money under management to keep their services.

According to roughly 63% of advisors surveyed by Kitces, a minimum account size requirement is often set at $100,000.

Numerous companies, however, are willing to engage with individual clients who are both above and below the high-net-worth level and do not have investment minimums.

Asking an advisor personally or looking over their Form ADV will tell you if a firm has a minimum initial investment or account size requirements. At their discretion, some companies with minimal standards will occasionally also exclude certain clients from them.

Step 4: Look for and investigate possible financial advisors

It’s time to locate an advisor now that you’ve determined your areas of need and even have a rough concept of the cost of these services. Fortunately, there are several resources and methods you may use to locate a financial expert.

Word-of-mouth and recommendations:

Even though we have access to a wealth of technology, sometimes the best advisors can be found through good old-fashioned word-of-mouth. Find out what they appreciate and don’t like about the financial adviser and whether they would recommend their services if any friends, family, or coworkers have a financial advisor. If you ask someone you trust who is in a similar financial situation to yours, these suggestions may be especially beneficial.

Leading advisors in your region:

There are many options available on SmartAsset to help you find an advisor in your area. In addition to a list of the best financial advisers nationwide, we also have a variety of carefully selected lists of the best financial advisors in numerous cities and every state in the union.

Tool for matching SmartAssets:

With the help of SmartAsset’s free service, you may find up to three local, screened financial advisors. You can then schedule a free initial consultation with your advisor matches to choose which one is best for you. Get started right away if you’re prepared to locate an advisor who can assist you in reaching your financial objectives.

Large companies:

To locate an advisor, you can also look for big, national companies with well-known logos. Giants in the financial services industry, such as Vanguard, Fidelity, and Schwab, provide advice services via robo-advisors and conventional human advisors.

Databases for advice:

To locate advisers, you can search a variety of web databases. Examples include the Garrett Planning Network, the National Association of Personal Financial Advisors (NAPFA), the CFP Board of Standards, and SmartAdvisor Match.

Step 5: Investigate Potential Financial Advisors

The crucial stage of screening and interviewing financial advisors has now arrived. It’s best to talk to at least three options after you’ve identified several possible matches to get a sense of what makes them unique.

Selecting an advisor who possesses the necessary training and expertise to assist with your particular needs is a smart move. You can refine your search by checking your selected advisors’ credentials or any potential red flags.

Certifications to Seek

To demonstrate or enhance their expertise in a given area and the services they offer to clients, advisers might obtain a variety of financial certifications. You will likely be able to locate an advisor with the appropriate certification if you’re seeking assistance with a particular subject or area of need. Here are some typical professional designations for financial advisors and what you should expect from each

CFP®, or Certified Financial PlannerTM:

CFP®s are fiduciary advisors with extensive knowledge of a wide range of financial subjects. They offer individualized financial strategies and evaluate their clients’ whole financial portfolios. A professional must finish a specific curriculum, obtain job experience, and then pass an exam with 170 multiple-choice questions spread over two three-hour sessions in order to become a CFP®. The CFP Board administers the exam, which has a success record of just about 65% in the past.

CFA®, or Chartered Financial Analyst:

A grasp of financial analytics, trends, and markets is indicated by the CFA® designation. CFA® charterholders typically have positions in investment analysis at banks, investment funds, insurance companies, and financial advising organizations.

Becoming a CFA® has a lot of requirements. In addition to having at least 4,000 hours of relevant professional experience or advanced education, a candidate must pass three challenging tests. According to the CFA® Institute, historically, only roughly 45% of applicants pass the CFA® tests.

CLU®, or Chartered Life Underwriter®:

The most popular credential for insurance agents is the CLU® designation. Candidates must complete five courses offered by the American College of Financial Services, although there is no comprehensive test.

Typically, Chartered Life Underwriters® are specialists in risk management, estate planning, and life insurance.

Although it’s critical to comprehend the meaning of these qualifications, you shouldn’t base your choice only on the letters that follow your advisor’s name.

“The most important thing for any consumer is to find a financial advisor who listens to them and is willing to answer their questions, regardless of how impressive their credentials may seem,” said Niv Persaud, a Certified Financial PlannerTM and managing director at Transition Planning + Guidance, LLC in Atlanta.

Keep in mind that a person is not automatically qualified as a financial advisor based just on some of these credentials. For instance, a certified public accountant might not be able to offer you retirement or investing advice.

However, these credentials could complete an advisor’s qualifications, together with the right regulatory status and experience.

Warning Signs for Financial Advisors and Companies

Keep an eye out for warning signs and previous transgressions while you are evaluating various organizations and advisors with whom to collaborate. The following are some things to consider that can make you hesitant to proceed with a specific advisor:

Disclosures:

To look up an advisor’s history for any legal, civil, or regulatory infractions, you can utilize FINRA’s BrokerCheck tool and the SEC’s Investment Adviser Public Disclosure website. You can read about the alleged violations if the advisor and/or their firm have previously been cited or faced disciplinary procedures. Additionally, you may observe whether and how the violations were fixed.

Strategies of pressure:

Tess Zigo, a Palm Harbor, Florida-based Certified Financial PlannerTM and Certified Public Accountant, warns against dealing with advisors who employ coercive techniques or provide a discount for instant customer signup. “These are outdated sales tactics, and I wouldn’t trust someone with my money if they were using them,” Zigo stated.

Rewards:

Additionally, you should be on the lookout for fee arrangements that could encourage advisors to take particular actions or make particular suggestions. Is the advisor fee-based or fee-only, for example? What types of commissions can a fee-based advisor receive if they are a dual registrant and fully disclose their status to the client?

Additionally, how can this encourage the advisor to make specific recommendations?
Additionally, you want to inquire about any extra performance-based costs they may have. These fees may encourage clients to make riskier investments in their portfolios to increase returns and fees.

Disclosure of any potential conflicts of interest will be required. Although fee-based advisers are required to act in their client’s best interests, you might not want to deal with an advisor whose motivations influence their recommendations in this manner.

These warning signs might not always be a definitive “no ” in your review process. However, before making a choice, it’s crucial to exercise caution and ensure that you comprehend all the details of each.

Fiduciary Obligation

As was mentioned earlier, make sure to confirm if the advisor is indeed subject to a fiduciary duty. Keep in mind that RIA businesses must adhere to a fiduciary requirement. Verify whether the firm mentions its fiduciary duty to clients by looking through its Form ADV and brochure. A fiduciary standard should be upheld by the advisor you choose.

Strategies for Investing

Another option is the investment techniques an advisor uses to manage client portfolios. Do they include a broad range of assets in their clients’ portfolios, or do they specialize in a specific investing style? Some information about the advisor’s usual methods and how they invest client assets should be available on their website.

In a one-on-one interview, you can also inquire about the firm’s investing strategy and study its Form ADV brochure. While some businesses take a more strict approach, many may adjust their investing plan to meet their clients’ needs.

Questions to Pose to Possible Advisors

You should inquire about everything discussed in this how-to guide when you meet with a financial advisor, including certifications, fees, and their overall investing plan. During your consultation, you may ask the following specific questions:

As a fiduciary, are you?

What is your charge schedule?

Do you receive commissions when you sell goods or services from third parties?

Do you require a minimum investment amount?

What is the number of your clients?

Do you solely deal with specific types of customers?

What is the frequency of your client meetings?

Which investment philosophy do you adhere to?

Are there any disclosures on file for you?

Do you own any finance certificates?

What other expenses should I be mindful of besides advising fees?

Are you an expert in any particular field?

Your circumstances and the qualities you’re seeking in a financial counselor will determine the appropriate responses to these questions.

Step 6: Concluding Your Collaboration
Hopefully, at this stage of the process, you have located a financial advisor who meets your needs. Let’s now examine the last actions you must take to engage your financial advisor and begin using their services.
After selecting a financial advisor, follow these five steps:
1. Put your name on the dotted line.
When you’re prepared to proceed with your preferred financial advisor, they will ask you to sign a few documents that define and confirm your partnership. Consider having an attorney review the agreements if you’re unsure about some of the terms you’re signing or if you’re not confident in the discussions that have taken place thus far. Finally, make sure your fees are spelled out in these contracts, and don’t be scared to ask questions if you don’t understand something.
2. Make a Money Transfer
You must move your funds to an account that your advisor can access, assuming they will be handling your investments. The custody rule, a clause in the Investment Advisers Act of 1940 designed to strengthen the protection of client assets, must be followed by investment advisors who are registered with the SEC.
According to the rule, client assets must be held by a qualified custodian—a bank or other financial institution, specific foreign businesses, futures commission merchants, or a licensed broker-dealer.
3. Select Investment Management: Discretionary or Nondiscretionary
Additionally, you should decide how much authority to delegate to your advisor. There are two main categories: discretionary and nondiscretionary portfolio management.
Discretionary management: The advisor will always have the power to trade and conduct transactions in your account without getting your express consent.
Nondiscretionary management: Each transaction involving your portfolio must be approved in advance. Certain companies may manage only one of these two account types.
The more common method is discretionary, as authorizing each deal could take a long time. If keeping your account nondiscretionary is important, you should focus a lot of effort on it during the vetting process.
4. Ask Your Advisor to Draft a Budget
As a new client, your financial advisor will collaborate with you to develop a financial management and investment strategy. In addition to discussing your financial objectives, your advisor will evaluate your present financial status, taking into account your risk tolerance and other significant variables.
An investment policy statement (IPS), a written document that describes your objectives, risk tolerance, time horizon, and asset allocation, may be used to formalize this phase.
If you have hired them just for financial planning, the advisor will start creating a comprehensive plan that may cover retirement and estate planning, insurance plans, and other subjects. If you know what you want your plan to include, you should express all of your needs as early as possible in your client-advisor relationship.
5. Schedule Upcoming Consultations With Your AdvisorThe last phase involves meeting with your advisor at least once a year or as frequently as you both agree. At these regular meetings, you will receive portfolio updates and discuss any recent changes in your financial situation. Any rules do not govern the frequency of your meetings with your advisor.
You shouldn’t wait for an annual meeting to talk to your advisor about a change in your life that should require a change in your financial status. For instance, you could modify your entire financial strategy or your estate planning agreements after getting married. Your next scheduled meeting shouldn’t be months away.

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