How To Choose A Financial Advisor

You may have read about financial advisors, financial planners, and wealth managers. As a high-net-worth individual, you recognize the potential value that professional financial advice can bring to managing complex financial situations. When significant wealth is involved, the stakes are higher, and careful planning becomes even more critical. Working with a financial advisor can be an important step toward helping you achieve your long-term financial goals.

Knowing how to choose a financial advisor is not always easy. First, it is important to understand their fee structure. Financial advisors typically earn money by charging fees for the services they provide. Carefully evaluating whether the fees make sense in light of the benefits received is an essential first step. It is also important to distinguish between fee-only and fee-based advisors, as well as to understand whether they charge an annual fee based on the assets they manage.

The term “financial advisor” is broad and can include financial planners, portfolio managers, wealth managers, and other professionals who manage assets or provide financial advice. Understanding the types of financial advisors and their specializations is critical to making an informed choice. In addition to human advisors, some individuals may consider Robo-advisors, which generally offer lower costs by using computer algorithms to manage assets and answer financial questions.

Once you have determined the type of advisor that fits your needs, the next step is to verify the advisor’s credentials to ensure legitimacy and professionalism. Checking an advisor’s background helps minimize risks and increases confidence in your selection.

Finally, we will explore additional factors that can help you identify the right financial advisor to meet your specific.

6 Crucial Points for Choosing a Financial Advisor

1. Decide which services you need
Different advisors offer different services, so it is important to clarify which services are most important to you. If an advisor is not a match for your specific needs, it is best to continue your search. Services you may require could include retirement planning, debt management, investing, estate planning, assistance with tax returns, or purchasing insurance.

2. Check backgrounds
After identifying potential advisors, research their professional backgrounds. Use resources like FINRA’s BrokerCheck or the SEC’s database to verify whether the advisor has any disclosures or disciplinary actions. Reviewing the advisor’s Form ADV can also provide details about services offered, fees charged, and any past regulatory issues.

3. Check on credentials
Confirm the advisor’s professional designations, such as Certified Financial Planner (CFP), through the appropriate certifying organizations.

4. Research financial advisor fees
Fee structures can vary widely. Ideally, consider a fee-only financial advisor whose compensation comes solely from client fees, reducing the likelihood of conflicts of interest. Always inquire about the costs associated with any products or services they recommend.

5. Create a list of questions to ask
Prepare a list of questions for any advisor you are considering. Topics should include services provided, associated costs, investment strategies, and the advisor’s background and experience. Understanding whether they follow a fixed approach or adapt strategies based on client needs is also important.

6. Set up a first meeting with the financial advisor
For the initial meeting, be prepared with details about your income, expenses, liabilities (such as auto loans or credit card balances), investments, and other assets. Bringing recent tax returns and insurance policy documents can help the advisor better understand your financial picture.

• How long should you stay with a financial advisor?
• What Does a Financial Advisor Do?
• Who is the most trusted financial advisor?
• Do millionaires use financial advisors?
• What questions to ask when hiring a financial advisor?
• Who is the best person to get financial advice from?
• How much money should you have before hiring a financial advisor?
• Are financial advisors worth their money?
• What do I need to know before meeting with a financial advisor?
• What are the pros and cons of hiring a financial advisor?

Financial Advisor Services

A financial advisor can develop a financial plan that provides a structured framework for achieving your financial goals. This plan typically includes an investment strategy tailored to your personal preferences and risk tolerance. A financial advisor also monitors investments over time and may recommend adjustments as market conditions or your personal circumstances evolve.

3 Types of Financial Advisor

1. Robo-Advisors

Robo-advisors use online software algorithms to provide financial advice and execute trades on your behalf. Their services are typically low-cost or free, making them accessible options for basic financial management needs.

2. Online Advisors

Online advisors combine digital financial tools with access to human advisors. While they offer some personalized advice, the level of customization may be limited compared to traditional advisory services.

3. Traditional Financial Advisors

A traditional financial advisor works directly with you to help meet your financial goals. Through a personal relationship, the advisor becomes familiar with your unique financial situation, enabling more customized strategies for growing and protecting your wealth.    

The Benefits of Using a Traditional Financial Advisor

A traditional financial advisor can offer personalized support by understanding your unique financial goals and circumstances. Maintaining an ongoing relationship with an advisor can also help you build greater financial knowledge and confidence, supporting more informed decision-making over time.

Who should hire a financial advisor?

Financial advisors typically charge fees that can range from a few thousand dollars to significantly higher amounts, depending on the services provided and the complexity of the client’s financial situation. When considering how to choose a financial advisor, it is important to understand that advisors operate under different fee models, including fee-only and fee-based structures.

Individuals with a few hundred thousand dollars or several million dollars in assets often find themselves managing multiple financial priorities, including taxes, investment costs, retirement planning, and legacy planning. Some may choose to work with separate specialists such as accountants, portfolio managers, and financial planners to address different areas individually.

However, for those who prefer an integrated approach to financial planning and wealth management, working with a financial advisor who offers comprehensive services can provide greater convenience and strategic coordination.

Hiring a financial advisor may be especially beneficial for individuals who have previously worked with advisors but were dissatisfied with investment outcomes, high turnover in portfolio strategies, or unexpected tax consequences. Finding an advisor who is experienced with high-net-worth wealth management and who follows fiduciary principles can help align financial strategies more closely with long-term goals.

Whether you are looking to save time, manage costs more efficiently, or access specialized expertise, partnering with a financial advisor can be an important step toward achieving a more structured and confident financial future.

Some other reasons to hire a financial advisor

Beyond the reasons already discussed, there are additional factors to consider when thinking about how to choose a financial advisor. Even if you have a solid understanding of investing and finance, seeking an independent opinion can help minimize mistakes when making important decisions.

If you are managing multiple responsibilities and do not have the time to stay current on complex financial topics, working with a financial advisor can provide professional oversight and strategic guidance. Financial advisors bring specialized knowledge that can support the management of more sophisticated financial situations.

Generally, the main motivations for hiring a financial advisor include the desire to maximize investment performance and to achieve long-term financial goals.

Individuals who have diverse financial needs—such as managing real estate sales proceeds, navigating gift tax considerations, planning for business succession, or engaging in philanthropic efforts—can particularly benefit from working with an experienced advisor. These activities often have interconnected financial implications, and a well-trained professional can help ensure decisions are made with a holistic view of your entire financial situation.

Understanding how to choose a financial advisor ensures you select someone capable of making informed, coordinated decisions that support all areas of your financial life.

Understand the types of financial advisors

“Financial advisor” is a broad term that applies to professionals who offer advice on personal finance. A financial advisor could be a wealth manager, financial planner, retirement planner, portfolio manager, investment advisor, or another financial professional. When thinking about how to choose a financial advisor, it is important to first understand the types of advisors available.

A financial planner helps individuals structure their financial lives by studying their income, expenses, life goals, and timelines. Based on this information, they create an investment plan, often incorporating some tax-related advice. Certified Financial Planners (CFPs) have passed rigorous exams and are certified to provide comprehensive financial planning services.

Wealth managers operate similarly to financial planners but focus exclusively on high-net-worth and ultra-high-net-worth individuals. Wealth managers typically have account minimums and specialize in managing complex financial situations, including multi-million-dollar transactions, estate planning, philanthropy, retirement planning, and real estate strategies.

Investment advisors and portfolio managers primarily focus on managing assets rather than comprehensive financial life planning. Their work is centered around optimizing the rate of return on managed funds, and they may also recommend investment products. While investment advisors can be valuable for portfolio growth, they may place less emphasis on broader life goals or financial security strategies.

Understanding these distinctions is an important step toward selecting the financial advisor who best fits your needs.

5 Checks to make on the financial advisor’s credentials

To reduce the risk of working with an advisor who may not meet your needs, conducting a background check is an important step when considering how to choose a financial advisor. As you research advisors, you will notice differences in the services offered and the qualifications held.

Some advisors are listed on databases such as the Certified Financial Planner (CFP) website, the National Association of Personal Financial Advisors (NAPFA) website, the Financial Planning Association (FPA), or the Financial Planning Standards Board (FPSB). Membership in professional organizations can provide one way to verify an advisor’s credentials.

You can also review an advisor’s educational background, work experience, and public presence on platforms like LinkedIn. Articles or blogs published in reputable outlets can also add credibility. If an advisor mentions memberships or certifications, it is a good practice to request their registration number and verify it through the appropriate regulatory or professional body.

Another important factor to consider when choosing a financial advisor is fiduciary status. A fiduciary is registered either with a state regulator or the SEC and is legally obligated to act in the client’s best interest. Fiduciaries must also disclose any potential conflicts of interest.

Additionally, gathering feedback from people who have worked with a particular advisor can be valuable. If you do not know someone personally, consider asking within your network—family, friends, or colleagues—if they have any direct or indirect connections who can share their experiences.

Taking these steps can help you find a qualified, credible financial advisor who aligns with your financial goals.

After checking the credentials, how to choose a financial advisor

Once you have conducted research and verified the credibility of a financial advisor, the next step is to schedule a one-on-one meeting. Trust is essential when entrusting someone with the management of your finances. Meeting in person or virtually allows you to ask questions, understand their approach, and assess their communication style. It also provides an opportunity to determine whether the advisor is someone you feel comfortable working with and whether they seem genuine and trustworthy.

Before meeting with an advisor, it can be helpful to think about your specific financial priorities. Some individuals may seek expertise in tax strategies, while others may need assistance with complex transactions, such as selling high-value real estate or planning for retirement in a new location.

Understanding how to choose a financial advisor also includes evaluating the advisor’s specialization. If you are a high-net-worth individual, it is important to work with someone who has experience managing significant portfolios and understands the complexities associated with larger asset bases. Matching your needs with the advisor’s experience and typical client profile can lead to more effective, tailored financial planning. Financial advisory needs vary widely, and a customized approach is often essential to achieving long-term success.