What to look for in a financial advisor

A financial advisor is someone you pay to help you make decisions about money — saving, investing, retirement, insurance, taxes, or estate planning. The right advisor for you depends on what you need help with, how much money you have to invest, and how much you want to pay. There is no single "best" advisor; the fit matters more than the title.

Start by being clear about what you actually need. Do you want help picking investments? Do you need a retirement plan? Are you trying to reduce taxes? Do you want someone to manage your money entirely, or just give you guidance? Different advisors specialize in different things, and knowing your own goal makes it much easier to find someone who can actually help.

Key Takeaways

  • Decide what you need help with before you start looking — investment information, retirement planning, tax strategy, or full money management — because different advisors specialize in different areas.
  • Check whether an advisor is a fiduciary (legally required to put your interests first) or not, because non-fiduciaries can recommend products that pay them more even if they are not best for you.
  • Understand how the advisor is paid: commission on products sold, a flat fee, an hourly rate, or a percentage of assets under management, because the payment method shapes what they recommend.
  • Verify credentials through FINRA BrokerCheck or the SEC's Investment Adviser Public Disclosure database, and ask about any disciplinary history or complaints.
  • Interview at least two or three advisors before deciding, and ask specific questions about their experience with situations like yours.

Fiduciary versus non-fiduciary: what the difference means for you

A fiduciary is legally required to put your interests ahead of their own. A non-fiduciary only has to recommend products that are "suitable" for you — which can mean products that pay them a higher commission, even if a different product would be better for your situation.

Registered Investment Advisors (RIAs) are fiduciaries by law. Stockbrokers and insurance agents are often not. Some firms employ both types of people, so you need to ask directly: "Are you a fiduciary 100% of the time, or only when you are giving investment information?" Get the answer in writing. A fiduciary relationship does not may provide good information, but it removes a financial incentive to steer you wrong.

How advisors get paid, and why it matters

The way an advisor is paid shapes what they recommend. There are four main payment models:

  • Commission-based: The advisor earns money when you buy a product (a mutual fund, insurance policy, annuity). They have an incentive to sell you something, even if you do not need it, and to sell you higher-commission products over lower-commission ones.
  • Fee-only: You pay the advisor directly — either a flat fee, an hourly rate, or a percentage of assets they manage for you. They do not earn money from selling products, so there is no built-in conflict of interest. Fee-only advisors are often fiduciaries.
  • Fee-based: A mix of fees and commissions. The advisor charges you a fee and also earns commission on products. This can work, but you need to understand both parts of how they are paid.
  • Assets under management (AUM): You pay a percentage of the money they manage for you — typically 0.5% to 1.5% per year. This aligns incentives: the advisor makes more money when your account grows. But it also means they have less incentive to help you if you have a small account.

Ask the advisor to explain their entire compensation in writing. If they are vague or defensive about how they make money, that is a red flag.

Checking credentials and disciplinary history

Credentials matter, but not all of them mean the same thing. A Certified Financial Planner (CFP) has passed rigorous exams and is required to act as a fiduciary. A Chartered Financial Consultant (ChFC) has similar training. A Certified Public Accountant (CPA) has tax informed. But someone can call themselves a "financial advisor" or "financial consultant" with no credentials at all.

Before you meet with an advisor, check their background on two free databases: FINRA BrokerCheck (for stockbrokers and brokerage firms) and the SEC's Investment Adviser Public Disclosure database (for registered investment advisors). These show you whether the person is registered, what credentials they hold, and whether there are any complaints or disciplinary actions against them.

Ask the advisor directly: "Have you ever been disciplined by a regulator, sued by a client, or had a complaint filed against you?" Their answer should match what you find in the databases. If it does not, walk away.

Questions to ask before you hire an advisor

Prepare a list of specific questions and ask at least two or three advisors the same questions. This lets you compare their answers and see who understands your situation best.

  • What is your experience working with people in my situation? (Be specific: early retirement, business owner, recently widowed, inheriting money, etc.)
  • How do you charge for your services, and what is the total cost in dollars per year for someone like me?
  • Are you a fiduciary 100% of the time?
  • What is your investment philosophy? (Do they believe in active management, index funds, a mix? Can they explain why?)
  • How often will we meet, and how will we communicate between meetings?
  • If I disagree with a recommendation, how do you handle that?
  • What happens if I want to leave? Is there a contract, and what are the terms?
  • Can you give me references from clients in a similar situation to mine?

Pay attention to how they answer, not just what they say. A good advisor listens more than they talk, asks questions about your goals and concerns, and explains things in plain language. If they use jargon to impress you or pressure you to decide quickly, that is a warning sign.

Minimum account sizes and what they mean

Many advisors have a minimum account size — the smallest amount of money they will manage for you. This might be $25,000, $100,000, $250,000, or more. If your account is smaller than the minimum, the advisor will not take you on, because the fee would not be worth their time.

If you have a smaller account, you have a few options: look for advisors who work with smaller accounts (many do), pay an hourly or flat fee for information rather than ongoing management, or use a robo-advisor (an automated service that builds and manages a portfolio for you based on your goals). None of these is better or worse — it depends on what you need and what you can afford to pay.

Red flags that mean you should keep looking

Walk away from an advisor if they may provide returns (no one can), pressure you to decide quickly, are vague about how they are paid, have a history of complaints or disciplinary action, or do not listen to your concerns. Also be cautious if they recommend putting all your money into one type of investment, if they suggest you borrow money to invest, or if they recommend products you do not understand.

Trust your instincts. If something feels off, it probably is. There are plenty of good advisors out there, and you should feel comfortable and confident with whoever you choose.

Frequently Asked Questions

Do I need a financial advisor?

It depends on your situation. If your finances are straightforward — you have a job, a savings account, and a 401(k) — you may not need one. If you have investments, own a business, are planning for retirement, or have a complex tax situation, an advisor can be worth the cost. Consider whether you have the time and knowledge to make these decisions on your own.

What is the difference between a financial advisor and a financial planner?

A financial advisor typically gives information on specific topics like investments or insurance. A financial planner takes a broader view and creates a comprehensive plan covering savings, investments, retirement, taxes, insurance, and estate planning. A financial planner usually charges more but addresses your whole financial picture.

How much does a financial advisor cost?

It varies widely. Fee-only advisors might charge $1,000 to $5,000 per year for ongoing management of a small account, or 0.5% to 1.5% of assets under management for larger accounts. Commission-based advisors do not charge you directly, but you pay through the products you buy. Hourly advisors might charge $150 to $400 per hour. Ask for a total cost estimate before you hire anyone.

Can I change advisors if I am not happy?

Yes. Read your contract to see if there is a termination fee or notice period, but you are not locked in. If you want to move your investments to a new advisor, the new advisor can usually help you transfer the accounts. Ask about the process before you switch.

What should I do if I think my advisor is recommending something that is not in my best interest?

Ask them to explain their reasoning in detail, and ask them to put the recommendation in writing. If you are still uncomfortable, get a second opinion from another advisor. If you believe your advisor has acted unethically or illegally, you can file a complaint with FINRA or the SEC using their online complaint forms.