Question: “I am looking for a financial adviser but I’m struggling to figure out the best way to find one. Where should I start looking? What questions should I ask? What else should I know in order to make this process successful?”
Answer: It’s not easy finding a financial adviser, and you will want to vet and interview multiple advisers before selecting one. Because almost anyone can call themselves a financial adviser, look for someone credentialed, such as a chartered financial analyst (CFA) or certified financial planner (CFP), both of which require rigorous study, continuing education and adherence to high ethical standards. You can use this free tool to get matched with fiduciary financial advisers, from our partner SmartAsset, as well as sites like CFP Board or NAPFA.
Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.
Focus on fee-only, fiduciary advisers, as they “are compensated solely by you, the client. Neither the adviser nor any related party receives compensation contingent on the purchase or sale of financial products. Use professional groups like the National Association of Personal Financial Advisors or Fee Only Network that only list advisers who are fiduciaries and fee-only,” says certified financial planner Kerry Connell at HTG Investment Advisors.
The importance of working with a fee-only fiduciary cannot be overstated, pros tell us. “These are professionals who are legally required to act in your best interest and who do not earn commissions for selling financial products. Find someone who listens before offering advice. The right adviser should feel like a partner, not a salesperson,” says Dustin G. Suttle, certified financial planner at Suttle Crossland Wealth Advisors.
Also keep in mind that fee-only does not mean low fee or no fee. “What it really means is transparent fee. No adviser should deny having any conflicts, transparency about conflicts is what matters,” says Connell.
What to ask — and how to vet an adviser
Here is a list of questions to ask any adviser you might hire to vet them. “[Inquire about] their fiduciary status. Are you always a fiduciary and will you state that in writing? Ask if anybody else will ever pay them to advise you and if they participate in any sales contests creating incentives to favor particular vendors,” says Connell.
During your first meeting, focus on what matters most to you. “Don’t be afraid to ask direct questions, including their fee structure, communication approach and availability. You should do most of the talking in the first meeting so the adviser gains a full understanding of your financial situation, goals and priorities,” says Jeffrey Mellone, executive wealth management adviser at TIAA.
Discussing fees and the adviser’s investment approach are also important. “Will you itemize all your fees and expenses in writing? You want them to say yes to that. Do you believe you can beat the market? You want them to say no to that. Also ask how often they trade. You want the answer to be as seldom as possible, ideally once or twice a year at most,” says Connell.
Many people initially ask advisers about performance, and while that’s understandable, it’s not necessarily the best starting point. “Most studies show that around 90% of performance comes down to asset allocation, how much is invested in stocks versus bonds, rather than individual fund selection. Performance also depends on factors like management fees and fund costs, so understanding the adviser’s fee structure is vital,” says Mellone. If you focus solely on performance risks, Mellone says you may overlook other critical aspects of financial planning like estate planning, supporting family or achieving lifestyle goals like travel in retirement.
For that reason, you’ll want to seek out an adviser who asks you questions as well. “They should ask about your goals, priorities and overall financial picture. Without a deep understanding of your personal and financial situation, an adviser can’t craft a plan tailored to your needs or recommend a portfolio that best mirrors your circumstances,” says Mellone.
Plus, “many financial advisers now have a strong online presence through social media, blogs or more which can give you a feel for how they work, their approach to planning and who they typically serve,” says certified financial planner Ryan Haiss at Flynn Zito Capital Management.
If this feels daunting so far, know that you’re not alone. “It’s crucial to look for someone you trust, someone who listens rather than tells. I often tell clients that finding a financial adviser is a lot like finding a doctor, electrician or plumber: personal recommendations are often the best starting point. Begin by asking friends, family or colleagues about their experiences,” says Mellone. You can also use this free tool to get matched with fiduciary financial advisers, from our partner SmartAsset, as well as sites like CFP Board or NAPFA.
What you might pay
Financial advisers operate under different fee structures, giving clients options when it comes to paying for financial services. Many advisers charge based on assets under management (AUM), with 1% AUM being the industry standard. Some advisers offer tiered AUM pricing depending on a client’s assets, which can reduce the fees.
Hourly financial advisers tend to charge between $200 and $500 per hour for service. “The hourly planning service charging modality is usually more transparent because the planner will tell you how long it may take to analyze your case and the cost of the hour. A planner’s hourly rate should be between $200 and $500 depending on their level of expertise and the aspects they will cover,” says certified financial planner Alonso Rodriguez Segarra at Advise Financial.
Project-based advisers charge between $1,500 and $7,500. “Project-based planning works best if you’re proactive and can really nail down the help you’re looking for. You can find advisers who offer project services by doing a simple search through the XY Planning Network,” says certified financial planner Danielle Harrison at Harrison Financial Planning. This way, you’re not locked into an ongoing relationship and can receive service for specific needs. You can use this free tool to get matched with fiduciary financial advisers, from our partner SmartAsset, as well as sites like CFP Board or NAPFA.
Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.
Questions edited for brevity and clarity. By emailing your questions to The Advicer, you agree to have them published anonymously on MarketWatch; they may appear anonymously in other media and platforms.