How to Find a Financial Advisor

High net worth and ultra high net worth individuals normally engage third-party services to manage their fortunes, mainly because they do not have the time or expertise to do it themselves.

They stand to benefit a great deal from following the advice of a financial advisor. A financial advisor is easily accessible, but sometimes, it’s hard to find the right financial advisor to work with you toward reaching your financial objectives, moving forward instead of asking yourself, “What’s next?” And we are here to answer that today. You can check out our informative guide on how to select a financial advisor for investors with $10 million or more.

Pillar Wealth Management is a 100% fee-only white-glove wealth management firm. We pride ourselves in providing a range of services to our high-net-worth clients in search of success and security in their finances. With our team’s combined 60 years of experience in wealth management, you could say we are masters of what we do. Deep domain knowledge of the industry and market trends helps us craft the best financial plans for our clients.

This article explains how to find a financial advisor that is right for you, how much money you will need to pay for their advice, and whether it’s worth it to hire a financial advisor. Let’s delve into it.

5 Steps to Choosing a Financial Advisor

The right financial advisor will guide you in actualizing your financial aspirations and securing your wealth for the future. A financial advisory professional can help you navigate the financial terrain, from planning your retirement to managing investments and even tax strategies. There are many personal financial advisors in the market, and it can be overwhelming to know where to start. Below are steps that will definitely help you identify and pick an advisor that suits your personal needs and, in the long run, establish a fruitful and trustworthy partnership.

The place to start in the selection of a financial advisor is to decide which area of your financial life needs professional help. Financial advisors vary and may specialize in retirement planning, investment management, tax, or estate planning. Defining your goals and identifying your financial needs are paramount in finding the best advisor to help you meet those goals and needs. This targeted approach not only saves time but also gives you access to advice that is tailor-made to your financial objectives.

You also need to understand the different types of financial advisors and the different ways they are compensated. Some financial advisors are compensated only by the fees paid by their clients; these are the best kind to work with because the fact that they are fee-only assures the client of the absence of conflicts of interest. Other advisors draw commissions from financial products, linked to product sales.

Step 1—Decide What Part of Your Financial Life You Need an Advisor For

Identify the areas where you most need help in your financial life. For instance, you may need a financial advisor to help you with retirement planning, investment, tax and estate planning, budgeting, or debt management. Once you know what you need, you can look for an advisor who is best placed to help you fulfill those needs. This focused approach ensures you get advice relevant to your situation, maximizing the benefits of professional financial guidance.

Retirement planning is the most common area where an individual seeks financial advice. The proximity of retirement age emphasizes the critical nature of the decisions made regarding savings, investments, and withdrawals. It can be greatly beneficial to have a financial advisor create a retirement plan that will maintain your lifestyle upon retirement and savings that will last for the duration. They can design strategies regarding Social Security benefits, pension options, and other sources of income in order to maximize retirement income. You can focus on this area to ensure that your years of retirement are secure and free from stress.

Another critical reason for hiring a financial advisor is for investment management. The advisor assists you in creating a diversified investment portfolio tailored to your level of acceptable risk and your financial goals to boost your wealth. Your advisor can inform you on market trends, asset allocation, and investment methodology so you can achieve maximum returns with minimum risk. Here you focus on one need: the need to engage an advisor who is skilled at steering you through the maze of the financial markets to your long-term financial goal through investment management.

Step 2—Understand the Different Types of Financial Advisors

The likelihood of finding a good match is increased by recognizing the different types of financial advisors available. Financial advisors can be guided by different pay models, and the services offered can also differ. Some advisors such as Registered Investment Advisors (RIAs) are regulated through the Securities and Exchange Commission or the state securities regulators.

A fiduciary duty requires RIAs to act in the best interest of the client by law, assuring the client of unbiased advice in line with their financial objectives. Robo-advisors are highly automated due to the use of algorithms to generate investment. In most cases, they are much cheaper than their human counterparts.

Understanding these various types of financial advisors can assist you in making an informed, intelligent decision and choosing an advisor who can work with you in your financial interest.

Fee-Only Financial Advisors

Fee-only advisors are paid only by their clients, and the fee may be hourly, a flat fee, or a percentage of the value of the investments they manage. Using fee-only advisors reduces the possibility of conflicts of interest. Since their income is not dependent on the nature of the products they recommend, fee-only advisors can offer more objective and unbiased advice based on the best interest of the client. This kind of open relationship fosters a trusting relationship between the advisor and the client to serve the needs and goals of the client.

Another very important advantage of working with a fee-only advisor is that their services are generally provided on an all-inclusive basis. They are comprehensive financial planners, with services including retirement planning, investment management, tax planning, estate planning, and even budgeting. They look at the big picture in a client’s financial situation and develop strategies in congruence with many different facets of their financial life and health, through effective and consistent financial planning. One can count on fee-only financial advisors for detailed and unbiased financial advice.

Commission-Based Financial Advisors

Commission-based financial advisors earn income from selling financial products. Sometimes, this can mean better pricing upfront for a client, since the advisor will not be paid directly by the client for the advice but rather based on the products that are selected. This structure also introduces potential conflicts of interest since the advisor may want to prescribe products that will pay them more commission. The products may not necessarily be useful in achieving the financial goals of the client. Clients should be aware of such a dynamic and assure themselves that their advisor recommends products that align with their financial needs and objectives.

Commission-based advisors also serve some useful purposes, especially for clients who have relatively simple financial needs or specific products they wish to purchase. Commission-based advisors are usually very knowledgeable about the products they sell. They can provide a level of insight into complex financial instruments. They can also provide an avenue for purchasing advice through a product rather than through an upfront fee. Clients should question what the compensation arrangement details are.

Registered Investment Advisors

Legally enforceable standards need to be observed by RIAs, who practice their craft under the requirement of acting in the utmost good faith for the benefit of the client. Thus, fiduciary standards make RIAs different from other financial advisors and assure a commitment to giving advice that is objective and only in the best interest of the client. RIAs are registered and regulated by the Securities and Exchange Commission (SEC) or the respective state-level securities regulator. Giving the professional a code of compliance and standards ensures that the advisor will provide transparent and objective advice, ensuring trust.

Most RIAs work under a fee-only model, paid on an hourly rate, flat rate, or a percentage of the assets under care—indicative of a broader convergence of interest between the advisor and advisee—eradicating the potential conflicts of interest that could arise under a commission-based compensation system.

RIAs offer comprehensive financial services, which include wide-scope financial plans, management of investments, tax planning, and estate planning, among others. All of these dimensions are discussed fully to ensure that they are integrated into a coherent and effective financial strategy. Working with an RIA may be an important choice if the client seeks a high level of trust and needs a full range of financial planning services.

Robo-Advisors

Robo advisors are online platforms that provide financial advice and portfolio management through algorithms. They provide a convenient and cost-effective financial management solution for individuals with relatively simple financial needs or those taking their first steps in investing. By plugging in information pertaining to their financial goals, risk tolerance, and investment preferences, clients receive investment recommendations tailored to their needs, and their portfolios are managed with limited human involvement. At their core, robo-advisors are cost-effective, which is why they attract the budget-conscious investor or the investor with a small portfolio.

They are inexpensive and convenient but have their limitations, the first one being a lack of human interaction. While robo-advisors may be proficient at routine investment responsibilities, they may lack the capacity to handle intricate financial situations or provide subtle advice based on an individual’s whole financial life. They may also not offer services outside investment management, like estate planning, tax strategies, or full-scope financial planning. For advanced financial needs or for people who prefer the human touch, they can be used in a hybrid manner that combines robo-advisor technology with access to human advisors.

Step 3—Choose What Kind of Financial Advice You Need

Not all financial advisors offer the same degree and level of advice and service. Some focus on comprehensive financial planning; some may deal with investment advice. Defining your needs—for either a one-time consultation, continual financial planning, or specific advice on investment—can help in narrowing down your selection.

Step 4—Decide How Much You Can Pay Your Financial Advisor

You know what you can afford to pay for financial advice based on your budget when selecting an advisor with expertise that fits your situation. Bear in mind that paying for quality advice can prove a valuable investment in your financial future.

Step 5—Research Financial Advisors

Look for credentials, such as certified financial planner or chartered financial analyst. Go to the regulatory bodies and check the advisor’s background with the SEC or FINRA. Look for references by way of survey reviews and testimonials from past clients and ask for references to make sure they have a good track record with clients similar to you.

10 Key Factors in Looking for a Financial Advisor

Below are the factors you should consider to guide you in looking for a financial advisor: note that some financial advisors are specialists; there are many types of advisors, from robo advisors to certified financial planners. If you choose a robo-advisor, you will have a robot as your advisor and not a human!

1. Track Record and Experience

A financial advisor’s track record and experience are likely to say volumes about their abilities and how well they can handle $5 million to $500 million in liquid assets. Only advisors with extensive experience and a good track record can capitalize effectively on market trends to help grow and protect their clients’ wealth.

Look at how long they’ve been working as a financial advisor, their track record, the results they’ve had so far, and how they are rated by their clients. You’re learning how to find a financial advisor, and looking at these factors is a good starting point. You can ask friends, colleagues, or others, about the financial services they use.

2. Fiduciary Vs. Suitability Standard

The best kind of financial advisor for you is one who holds to a fiduciary standard. Among myriad differences, this is one major distinction you can use to differentiate among financial advisors. While some are tied to a fiduciary standard, others are linked to the suitability standard.

When there is money involved, fiduciary advisors have a duty to help you make good decisions with your money. But what “good” means may be completely different depending on what type of advisor you use. Advisors who follow the suitability standard are obligated to provide investment management services and investment advice that are suitable for you.

It doesn’t make them bad, but they may not be the best. Financial advisors of this sort are interested in their gain and will go for investments or products that serve them—just as they serve you.

On the other hand, financial advisors who hold themselves to the fiduciary standard are wholly committed to serving your best interests, even if they incur losses as a result. That’s what makes them the best financial advisor for you. They don’t face any conflicts of interest and, therefore, have no problem guiding you toward investments and products that best align with your goals and needs. To know more, click here to start chatting with the fiduciary advisors at Pillar Wealth Management.

3. Understanding Costs

Another way to find a financial advisor that is right for you is to develop an understanding of costs, including the cost of a financial advisor. Excessive costs are a great way to gradually erode significant amounts of wealth. If you think all you have to worry about is the taxes and the advisor’s fee, you are gravely mistaken. In reality, there are many hidden costs and charges involved in wealth management.

There are taxes on capital gains, transaction charges, account minimums, bond sale spreads, internal expenses, margin interest costs, and a lot more. If your advisor doesn’t inform you of these costs, or worse, doesn’t know about them, they won’t do a very efficient job of managing your wealth and minimizing your expenses. This is just one of the aspects. If you want to find out about the other shifts you must make, click here to read our guide on maximizing portfolio growth strategies.

4. Constant Monitoring and Adjustments

When considering a financial advisor, you need to look at whether the advisor will be proactive. They won’t create a financial plan and expect you to stick with it for the rest of your life. This is what you can expect at a lot of private banks, where they have fixed investment packages that are proven to have good results with low risks for the bank. However, times change constantly, and an excellent financial advisor knows enough to adjust your financial plan accordingly.

The right financial advisor can guide you in making the right financial decisions to preserve your wealth during life changes such as marriage, divorce, recession, or market volatility. Find out more about preserving and protecting your wealth by requesting a free hardcover copy of our book The Art Of Protecting Ultra-High Net Worth Portfolios And Estates – Strategies for Families Worth $25 Million To $500 Million.

5. Commission Vs. Fee-Based Payment Model

In the context of acquiring a financial advisor, you need to take into account the payment model the financial advisor is working under. There are financial advisors who work under a commission-based payment model, where they are paid a commission every time they make a purchase or sale of a security on your behalf. This is a good model, except that some advisors can take advantage of their clients by making too many sales or purchases so that they can boost their commissions. A wiser choice is to stick to financial advisors who charge a flat fee for their services.

Pillar Wealth Management is a 100% fee-only wealth management firm. Having accrued over 30 years of experience providing tax and various cost deductions for our high-net-worth and ultra-high-net-worth clients, clients, we can keep our own costs and charges rather low. If you are concerned about costs, click here to speak with one of our advisors today.

6. Holistic Approach to Wealth Management

You may consider finding an advisor who takes a holistic approach to wealth management—not just focusing on producing great results for your portfolio. Such an advisor knows that total wealth management goes way beyond portfolio performance. It speaks to life goals and aspirations, and the portfolio is only a means to an end. Comprehensive wealth management takes into consideration retirement goals, eventualities, legacy planning, philanthropy, and more. Find out more by clicking here to read our comprehensive guide to improving portfolio performance.

7. Services

You want to find a financial advisor that offers services that meet your needs. For example, if you are single, without a family, do not own a lot of assets or real estate, and need help with retirement planning, then you would want a financial advisor who can help you create a retirement plan.

But what if you have a family to whom you will leave your money, and you have substantial and varied assets, and various financial goals and targets? Clearly, in this case, you need a financial advisor with knowledge and expertise in a range of financial services. Pillar Wealth Management offers a full range of financial services, from investment management to estate planning, retirement planning, risk management, and much more. Find out more about our services in this useful guide for investors with $10 million.

8. Credentials

Verify the financial advisor’s credentials. Some advisors purchase certifications or designations that sound good but are pretty meaningless. So, credentials require close scrutiny to determine if the advisor is right for you.

9. Frequency of Updates

Consider how well the financial advisor communicates with their clients. You don’t want a financial advisor who only contacts you once a year to convince you to buy some new security. Your financial advisor should provide you with monthly or quarterly reports on their activities, transactions, and portfolio performance results, as well as plans and predictions. Such an advisor will always be fully transparent with you and always keep you in the loop. Click here to start a conversation with one of our experienced and transparent advisors. Understanding how to find a financial advisor requires some effort, and we can help.

10. Personalized Financial Plan

The right advisor for you wants to understand your financial needs and goals so they can develop a personalized financial plan. This is one of the critical features of great financial advisors. They are not just going to ask you what your risk tolerance is or how much ROI you want. They will be interested in what you want in life, what your short- and long-term goals are, and what kind of lifestyle you would like to have. More information concerning this characteristic of the right financial advisor can be found in our ultimate guide on how to choose the best financial advisor.

Key Questions to Ask When Choosing a Financial Advisor

It’s important to ask the right questions before hiring a financial advisor who can work with you to reach your financial goals. Ask about their qualifications and professional certifications, their education, and in what areas of expertise they are certified. Finally, find out how they are compensated and what their fees are. Do they follow a fee-only, commission-based, or hybrid model, and are there any conflicting interests in the services they offer?

You also want to know if the advisor is a fiduciary, that is, legally obligated to work only in your best interests. If they offer financial planning, what does it focus on: retirement, tax, or investment? Ask about their investment philosophy and strategy for integrating your risk tolerance and financial planning needs. Finally, inquire about potential conflicts of interest and how they are managed. The answers to these basic questions will help you understand the advisor’s approach and, accordingly, judge if it aligns with your financial requirements and long-term objectives.

How Much Money Do You Need to See a Financial Advisor?

There is no standard benchmark for how much money you need to have before seeing a financial advisor. The services of a financial advisor or investment advisor are equally valuable to a person at any stage in life. That is because financial advisors can do the job that a stockbroker, accountant, insurance agent, or many others could do.

This is where a financial advisor comes in handy—for dealing with student debt or setting up a savings plan. For high net worth and ultra-high net worth individuals, financial professionals are necessary, and with them, huge losses of wealth to taxes can be avoided, and assets preserved at a level sufficient to implement your financial goals.