Handling your finances is one of the most important tasks in building the life and legacy you envision. But financial management can get complex as your responsibilities and opportunities grow, whether you’re saving for education, building a business, expanding your portfolio, purchasing a second home or establishing a charitable giving plan. That’s why working with a financial advisor who offers tailored, practical advice can make a meaningful difference.
A fiduciary should not be solely focused on selling products. Instead, they’re a financial professional committed to understanding your full picture—your goals, financial situation, risk preferences, estate and family needs, retirement plans, and more—and helping you create a plan that reflects it all.
This guide will walk you through what to look for in a financial advisor and how to choose the one who aligns with your unique goals.
What Does a Financial Advisor Do?
Financial advisors generally differ from other financial professionals in a few ways. Their responsibilities are centered around your needs as a client, their guidance is focused on long-term planning, and they offer a wide range of services designed to support your full financial picture. When picking a financial advisor, knowing these differences can help you make a more informed choice.
The Fiduciary Rule vs. Suitability Rule
Understanding the difference between the fiduciary standard and the suitability standard can help you make more confident financial decisions.
A fiduciary is legally required to act in your best interest. They must make recommendations with care, diligence and a focus on your long-term financial well-being. SEC Registered Investment Advisors are bound to this fiduciary standard, which is regulated by the Securities and Exchange Commission (SEC).
By contrast, some financial professionals, such as broker-dealers, follow the suitability standard. This standard requires financial professionals to make suitable recommendations based on your age, financial goals, and risk tolerance.
If you’re looking for a long-term partnership with someone who prioritizes your goals, seeking out an advisor that is held to the SEC’s fiduciary standard may be the right move.
The Duty of Care
One of the key differences between advisors held to a fiduciary standard and those who follow the suitability standard is the duty of care—the responsibility to provide advice and monitoring over the course of the relationship.
Financial planning should not be a one-and-done process. As life evolves, your plan should too. A financial advisor will help you adjust your plan whenever you experience a life change, like having a child, buying real estate, starting or selling a business, or facing unexpected expenses like health care costs.
Advisors may also collaborate with other professionals, including third-party specialists you already work with or professionals within their firm. For example, your CPA may help you manage short-term tax implications when filing your annual taxes, but a financial advisor takes a broader view. They may help you build a plan that considers tax efficiency in pursuit of your long-term financial goals. This can assist you in making the best decision for the future ahead, not just this next year.
Financial Planning
Financial planning, sometimes called wealth management, is at the core of what a financial advisor provides. It’s a comprehensive, ongoing process that brings together all aspects of your financial life into one cohesive strategy.
Think of your life as a whole. Beyond your day-to-day budgeting needs, you might be considering how to save for retirement (retirement planning), what money you want to invest outside of retirement plans (investment management), what happens to your assets when you’re gone (estate planning), your tax liabilities (tax planning), and what happens as you accumulate more wealth (private client services).
Your advisor will start with information gathering, either through a questionnaire or planning meetings. Your advisor should collect information on your:
- Finances and history. This includes basic information like income, current savings and investments, family information, employment, etc.
- Goals and objectives. Are you saving for retirement or starting a college fund? Are you hoping to retire at 65 or 70? Is philanthropy or leaving a legacy important to you? Some goals go beyond assets to involve your ideas, values and hopes for the next generation.
- Risk tolerance. Everyone is different. Are you cautious with your investments, or are you willing to take some risk for the potential of greater gain (or loss)?
- Some of these may reflect your risk tolerance, others may reflect your ideals and goals. Are you worried about a market crash or inflation? Do you not want to invest in companies with poor sustainability practices? Are you concerned about the future of any members of your family who may need additional support?
Your advisor will use this information to create a customized financial plan that can guide you in managing your wealth in the years ahead.
Retirement Planning
Retirement planning is about creating a strategy for generating income and sustaining your lifestyle once you’re no longer earning a regular paycheck from an employer or business.
Your advisor can help guide you through many decisions, including:
- How to structure your retirement savings plans, how and when to take distributions, and the tax implications of these decisions
- When to claim your Social Security benefits for the best return
- What other retirement income sources may be available or advisable, including insurance products, lines of credit, home equity cash options, rental income and more
- How to help ensure your health care expenses will be adequately covered by Medicare and/or other sources
- How to plan for long-term care if it becomes necessary
- How to provide for your family when you pass
Investment Management
With today’s wide range of investment options, building a portfolio that fits your goals and comfort with risk can feel overwhelming. Whether you’re saving through an employer-sponsored plan, an individual retirement account, or a brokerage account, there are many potential paths forward.
Investment options might include individual equities, exchange-traded funds (ETFs), index funds, bonds, cash equivalents, commodities, private equity, alternative investments, and more. You may also choose to diversify across large- and small-cap companies, or explore domestic and international interests.
Working with an advisor who understands market dynamics—both day-to-day shifts and long-term trends—can help you develop an investment strategy that aligns with your goals and risk tolerance.
Estate Planning
Your legacy is about your assets, personal values and philanthropic goals. Without an estate plan, your assets may be tied up in lengthy legal processes, often resulting in significant delays and expenses for your loved ones.
An advisor can help you:
- Choose the right structure or structures for your estate
- Create necessary legal documentation, with the help of estate planning attorneys
- Review and update beneficiaries on your financial accounts over time
- Select a reliable, knowledgeable trustee
- Explore charitable giving options, funeral arrangements, life insurance and more
Tax Planning
Tax planning is different from tax preparation. While tax preparation is reactive and focuses on the past year, tax planning is proactive and helps you make strategic decisions that may reduce tax liabilities over time.
Your tax advisor can help you evaluate the tax implications of key financial moves, such as:
- Funding or withdrawing from retirement accounts
- Selling a business
- Purchasing or managing rental property
- Selling stocks, real estate or other assets
- Navigating other major financial decisions
Private Client Services
As your wealth grows, your financial needs may become more complex, and you may need specialized help that not all advisors are equipped to offer. A private services advisor works with ultra-high-net-worth clients who require extra attention and additional services, like family meetings, alternative investments, legal reviews and private banking.
While not all investors need private client services, it’s helpful to know if your advisor has access to this level of service and a broader network of specialists who can support you as your financial situation evolves.
Step 1: Know What You Need from a Financial Advisor
The first step in picking a financial advisor is knowing what you need. Not every advisor offers the same services, and not every client needs the same level of support. By identifying your priorities and goals, you can narrow your search to advisors who are best suited to help.
To understand what to look for in a financial advisor, ask yourself what kind of support you’re looking for. Are you planning for retirement, managing an inheritance, preparing to sell a business or navigating a complex tax situation? Do you want guidance on a complicated portfolio or high tax bills?
Also consider whether you want one-time advice or ongoing financial management. This will depend on your goals and your timeline. Individuals with significant assets can benefit from a long-term relationship with a financial advisor who can help them adjust their strategy as life evolves.
Understanding your goals and preferences will help you focus your search and find an advisor who provides the specific services and level of support you need.
Step 2: Understand What to Look for in a Financial Advisor
Still wondering how to find a good financial advisor? Once you have a sense of what you need, you can use additional factors to narrow down your best choice.
Start by looking for certifications, which will usually be listed on an advisor’s website or even directly after their name in their email signature. Many certifications require advisors to be fiduciaries. Here are some of the main ones:
- CERTIFIED FINANCIAL PLANNING™ Professional (CFP™): This certification is one of the most distinguished in financial services, with extensive examination and continuing education requirements.
- Accredited Investment Fiduciary (AIF): Regulated by the Center for Fiduciary Studies, this certification requires advisors to adhere to fiduciary standards and undergo continuing education on fiduciary responsibility.
- Certified Public Accountant (CPA): A CPA is held to a “best interest” standard, which is not technically the same as a fiduciary standard but is close. CPAs might also hold the Personal Finance Specialist (PFS), which shows they are specialized in this area.
Other certifications may reflect a commitment to continuing education but don’t necessarily indicate fiduciary responsibility.
Next, consider the advisor’s investment philosophy. Their approach should align with your goals, risk profile, preferences, etc. Common strategies include:
- Value investing: Focuses on “bargains” or undervalued opportunities in the market
- Growth investing: Targets companies with strong growth potential
- Active investing: Relies on asset managers making hands-on decisions and moves in the markets
- Passive investing: Uses products like index funds to track the market with less involvement by a portfolio manager
- Momentum investing: Capitalizes on upward market trends
- Contrarian investing: Targets undervalued vehicles currently out of favor
- Income investing: Prioritizes producing an income stream from dividends or interest payments
- Socially responsible investing: Aligns portfolios with personal or environmental values
You should also assess whether a potential financial advisor has a communication and service style that makes you feel comfortable and well taken care of. Ask yourself:
- Do I feel heard and understood?
- Does the advisor explain things clearly, even when topics are complex?
- Are they transparent, responsive and easy to talk to?
You want an advisor who not only understands your goals but also makes you feel confident in the relationship.
Step 3: Ask the Right Questions When Choosing a Financial Advisor
An advisor should be able to answer any questions you have about the planning process. Asking the right questions is key to knowing if they’ll be a good fit for your goals.
Here are some sample questions to ask a prospective advisor:
- Are you a fiduciary?
- How are you compensated?
- How many years have you been an advisor?
- What access do you have to additional financial professionals I might need?
- What experience do you have with clients like me?
- How do you tailor advice to my situation?
- How often will we meet?
Once you’ve spoken to advisors, reflect on the answers and the transparency with which they were given. Was the advisor clear and direct or vague and uncertain? You want to find an advisor who both answers your questions and earns your trust.
Step 4: Understand the Costs of Working with a Financial Advisor
So, how much does a financial advisor cost? That depends on several factors, including the services offered, your needs and even your geographical location. However, one of the most important factors is how your advisor is compensated.
Common compensation structures include:
- Percentage of assets under management: The most traditional compensation structure, known as AUM, which can vary with the size of your portfolio
- Flat fees: A predetermined charge for a specified service, like developing an initial financial plan
- Hourly: Per-hour charge for advice or other services
- Retainer: An annual flat fee
- Commissions: Earned on the sale of specific financial products
Note that advisors who adhere to a fiduciary standard do not work on commissions, but broker-dealers can work on commission.
There are certain compensation red flags it’s best to avoid when selecting a financial advisor. These may include high commissions, recommendations that seem misaligned with your financial goals, or fees that aren’t clearly disclosed.
A trustworthy advisor should clearly explain how they’re paid and what services are included. They should also provide documentation or disclosures that help you understand the full cost of the relationship so you can make informed decisions with confidence.
Step 5: Make the Final Decision with Confidence
Now that you’ve gathered all the information you need to make a choice, how do you actually choose?
Look at qualifications first as a baseline. Having obtained certifications means an advisor has put effort into increasing their knowledge and building their career. Credentials can also reflect an advisor’s long-term dedication to their career, which matters when you’re looking for a lasting relationship.
Once you’ve narrowed the field to advisors with your desired credentials, focus on how their personalities and values align with yours. You want someone who is transparent, has a client-first mindset, communicates well with you and feels trustworthy.
These personal factors are just as important as professional credentials. Financial planning is one of the most important and personal journeys you’ll take. The right advisor should make you feel heard, respected, and supported—not overwhelmed or uncertain.
The relationship with your new financial advisor should be a long and profitable one. It’s worth taking the time to choose well.
Common Mistakes to Avoid When Picking a Financial Advisor
Here are some common mistakes people make when selecting a financial advisor:
- Not verifying their credentials through official channels. Use official resources like the SEC’s IAPD – Investment Adviser Public Disclosure – Homepage (.gov) or professional organizations such as the CFP Board to confirm an advisor’s certifications and registration.
- Not asking enough questions. Don’t hesitate to ask about fee structures, investment philosophy, services offered and how they tailor advice to your goals.
- Ignoring fiduciary status. Remember that only an advisor who is committed to the fiduciary standard is required to put your interests first, above their own or that of their firm.
- Basing decisions solely on referrals. A trusted referral can be helpful, but your friends and family may have different needs and requirements from you.
When Should You Start Working with a Financial Advisor?
People often seek out financial advisors during major life milestones or transitions, like marriage, homeownership, retirement, divorce, selling a business, receiving an inheritance, or losing a loved one. Some transitions are planned and gradual, but others can be sudden and unexpected.
That’s why working with a financial advisor early can be so beneficial. Proactive planning helps you prepare for the unexpected and make confident decisions, rather than reactive ones made under pressure.
So when is the right time to work with a financial advisor? The truth is, it’s never too early. A financial advisor can help you:
- Build a financial foundation and chart a course in your 20s
- Accumulate and preserve wealth in your 30s
- Build a team of knowledgeable professionals to handle more complex finances and continue preparing for retirement in your 40s and 50s
- Maximize your retirement and legacy planning in later years
Many people also wonder how much money they should have before using a financial advisor. Some advisors have minimum asset thresholds, which can range from $25,000 to $1 million or even more. It’s important to ask about this during the selection process.
If your assets don’t meet the minimum, you may want to consider a robo-advisor or a financial planner who works with clients earlier in their wealth-building journey.
FAQs About Finding the Right Financial Advisor
How do I find a good financial advisor?
You can use online advisor search tools, like those from professional organizations. Consider starting with recommendations from friends, family, colleagues or current professional advisors like your banker or attorney, but do your research as well.
What should I look for in a financial advisor?
Look for professional credentials, fiduciary status, the services you need, a clear and reasonable fee structure, the right personality match, and good listening and communication skills.
How much does a financial advisor cost?
Costs depend on the services you’re seeking, your geographical location, the resources included, the fee structure and your level of assets. For maximum transparency, you may want to consider an advisor with a fee-only structure who does not work on product commissions.
How do I know if a financial advisor is trustworthy?
Does your advisor answer your questions clearly and without hesitation? That’s a good sign. Are they transparent about their experience and resources? What does your intuition say when you’re speaking with them?
Should I choose a fiduciary?
Follow these five steps: know what you need, understand what to look for, ask a lot of questions, understand the costs, and evaluate the information you gather based on your own needs and values.
Choose a Financial Advisor with Confidence
Choosing a financial advisor is a big decision, but with the right approach, it’s one you can make with confidence. Start by understanding your own needs and goals. Then, look for the right credentials and qualities, ask thoughtful questions, understand the costs, and evaluate everything you learn through the lens of your personal values.
Taking the time to follow these steps can lead to a long-term partnership with an advisor who understands your priorities and can help you navigate life’s most important financial decisions.
Ready to take the next step? Find the right advisor for your financial journey with Carson’s personalized advisor matching program.
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