Whether you’re just starting out on your investing journey, or you’ve accumulated a sizeable nest egg, chances are you’ve considered seeking help from a financial professional. But perhaps you aren’t sure where to start—or if you can even afford it.
Don’t worry. Working with a financial advisor isn’t just for the rich and financial help is not a one-size-fits-all proposition. Armed with a bit of information about your financial picture, you can find the assistance you need at a price that fits your budget.
When should you work with a financial specialist?
In a 2022 Fidelity survey of Americans’ financial resolutions, 43 percent of respondents said they wanted to increase their savings. Meanwhile, savings objectives were nearly evenly split between 51 percent who planned to focus on long-term goals and 49 percent who planned to save for short-term objectives. At the same time, however, one-quarter of adults have nothing saved for retirement, according to a 2021 report from the Federal Reserve.
If any of these situations describes you, it may be time to seek the expertise of a financial professional. Not only can an advisor help you reach your financial goals, but they can help during major life changes that affect your financial situation, such as a divorce, death of a partner, or obtaining a large inheritance.
Types of financial professionals
There are many kinds of advisors available to help you make money decisions. These include:
Registered representatives: Some financial professionals primarily sell products—such as annuities or insurance policies—and earn a commission when you make a purchase.
Financial advisors: While a registered representative can help you with transactions, most of us want and need a little financial guidance. If you fall into this category, choose a fee-only advisor who adheres to high ethical industry standards and looks out for your best financial interest. In other words, this is someone who has a fiduciary responsibility to you and is not promoting products or services you may not need. You should ask if your advisor is a fiduciary, and you can verify their designation with the Securities and Exchange Commission (SEC).
Choose a financial advisor who is a Registered Investment Advisor or Investment Advisor Representative or one who has completed financial training and earned a designation, such as Certified Financial Planner (CFP), Certified Public Accountant (CPA), Personal Financial Specialist (PFS), or Chartered Financial Consultant (ChFC).
Money managers: A money manager is a financial advisor who makes investment decisions on your behalf.
Robo advisors: Automated investment services use computer programs to help you make investment decisions. Some services are strictly automated, while others have financial professionals who also provide some guidance. The number of organizations offering these services has ballooned in recent years, as have their offerings. Most provide services for a very low cost. In 2022, NerdWallet gave five-star ratings to SoFi, Betterment, and Wealthfront in this category.
Regardless of which route you go, make sure there are no unexpected costs, such as setup, maintenance, or termination fees. Finally, make sure your planner has a clean regulatory record by visiting the SEC’s action lookup feature and check their background and experience at the Financial Industry Regulatory Authority.
What type of help do you need?
If you have an occasional or one-time consultation it may be cost effective to pay an advisor by the hour or by the project. Needs in this category may include setting up a long-term investment strategy, wanting someone with whom to check in periodically as you manage your own investments, or creating an estate plan. Expect to pay about $200 to $400 per hour to meet with a financial planner, or to spend a couple thousand dollars for a comprehensive financial plan.
Once you begin amassing sizeable financial assets, you may want a money manager to provide hands-on, ongoing portfolio management of your investments and to make investment decisions for you. Financial planners generally charge a percent of assets, typically 0.25 percent to 1 percent annually, depending on the amount of money being managed. Many brokers offer portfolio management for clients who reach a certain financial threshold, and robo advisors may offer this for investments beginning at $50,000.
Keep in mind: Although 1 percent may sound like a lot of money, with this arrangement, your advisor has skin in the game, so to speak, to grow your portfolio. Furthermore, some planners decrease the percent charged as your account grows.
You need a complete financial plan—a road map for your entire financial life—including setting goals like saving for retirement, creating a budget, establishing an emergency fund, and devising an investment strategy. A financial planner can help you create a holistic financial plan.
How do you find a financial planner?
One good starting point is to ask people you know who are happy with their financial advisor. You can also search databases of financial planners via the following organizations. In most cases, you can narrow your search by criteria including location, type of clients served, fee structure, or specialty area (ie, retirement planning).
- The National Association of Personal Financial Advisors is a network of more than 4,000 fee-based financial professionals who commit to a yearly fiduciary oath and subscribe to a code of ethics.
- The CFP Board is a nonprofit organization that promotes professional standards in personal financial planning. The CFP Board also lets you verify a planner’s certification status.
- The Garrett Planning Network is a national network of hourly, fee-based advisors.
- The XY Planning Network allows you to look for a fee-for-service, fiduciary financial planner with no minimum investment required.
- The Alliance of Comprehensive Planners has a network of fee-based, tax-focused planners across the country.
Picking the right financial planner is a personal decision. A large financial practice will have a team of support personnel, including someone you can call if your planner is unreachable. You may also prefer working with an independent professional. The important thing is to find someone with whom you’re comfortable, who understands and is willing to get to know you, and who explains things clearly.
Don’t just go with the least expensive financial planner. Someone who charges more may ultimately do a better job growing your personal wealth over the long term.
To get the most out of your financial planner, be prepared before you meet. Make a list of your assets and liabilities, income, and short- and long-term financial goals. Know your comfort level with risk. Most importantly, ask questions and stay involved. While a planner can be crucial to your ongoing financial health, it's ultimately your money.
