One of the best investments you can make toward reaching your financial goals is working with a financial advisor. While financial planners can help you with your short- and long-term financial goals—like budgeting, investing and retirement planning—a financial advisor will zero in on your investing game. They can recommend, or even buy and sell, stocks, bonds, and mutual funds for you so you don’t have to spend your days glued to Bloomberg or CNBC to track every swing of the markets.
“Whether you’re buying a house on your own, getting married, starting to think about kids, planning for retirement, or just want to build a strong financial roadmap, a financial advisor can help you invest strategically and plan thoroughly for the future you really want,” says Emily Green (opens in new tab), the director of private wealth management at the female-focused investment platform Ellevest.
But Green and other experts agree you don’t need to hit a personal milestone to bring a financial advisor into your life. Here is a four-step action plan to help you decide whether you need a financial advisor and how to find someone you trust.
Step 1: Determine whether you need a financial advisor
Cathy Curtis, a certified financial planner (CFP), and founder and CEO of Cathy Curtis Financial Planning, which caters to self-made women and female-run households, says that while working with a financial advisor is advantageous at any time, you may want to wait until you have enough money to comfortably cover the associated fees. A trigger might be embarking on a high-paying job, receiving a raise, bonus, or equity, or getting an unexpected windfall such as an inheritance. If you’re not ready to pay for a financial advisor, you can start by using a robo-advisor, which is typically more affordable. Some firms and investment apps (such as Betterment, Ellevest, Sofi, and Vanguard) provide ongoing access to a financial advisor so you can get personalized advice at a lower cost.
Step 2: Decide your needs and budget
Once you’ve decided to retain a financial advisor, determine the services you need, your investment style, and what you’re willing to pay for their services. Financial advisors can help with a variety of portfolio management tasks such as impact investing, environmental, social, and corporate governance (ESG) investing, and tax, estate, retirement, and education planning.
When it comes to investment styles, there are several, including growth, value, buy and hold, index, dividend growth, and impact investing; and active or passive management. The world of personal finance is riddled with jargon, but it’s easily masterable.
But for now, let’s dig into fees. Anna N’Jie-Konte, a CFP and founder of Dare to Dream Financial Planning, which specializes in serving high-earning women of color, explains that there are three main pay structures for financial advisors. Some financial advisors earn a commission on any insurance or annuity plans they sell, others receive a set percentage of your assets under management (AUM), and fee-only financial advisors charge an hourly rate or project fee. (You may also find an advisor who prefers a commission comprised of a combination of two or all of these.)
Step 3: Look at potential financial advisors
If you have friends or relatives who use a financial advisor, it’s helpful to get a recommendation. But don’t accept referrals blindly. Be sure to vet them for your own needs and continue to shop for the best fit.
Curtis points to the National Association of Personal Financial Advisors (NAPFA) or XY Planning Network (XYPN) to search for an advisor by specialty or location. She explains that the advisors are all CFPs, which means they’ve passed an extensive certification process. “These organizations support independent advisors who are fiduciaries, meaning they take an oath to give advice that is in the best interest of their clients at all times,” she says.
N’Jie-Konte recommends running financial advisors and firms through BrokerCheck to learn their credentials, employment history, the services they provide, and certain criminal, regulatory, civil, or customer complaints that have been filed against them or their firm. You may also want to double down on your due diligence by checking your state securities regulator and running a background check.
Step 4: Evaluate whether it’s the right fit
Your next step is to interview financial advisors. Curtis recommends speaking with at least three financial advisors before making a decision and asking:
- What is your process for working with a client like me?
- What is your experience in working with clients like me?
- How are you paid for the services you provide? Besides what I pay you directly as my advisor, are there any other fees I should know about?
Green suggests also considering the broader team, whether there are employees who fit your demographic and understand your needs, and whether you feel comfortable with the advisor and firm. Instead of focusing only on retirement planning and portfolio management, N’Jie-Konte advises women in their 20s and 30s to make sure the financial advisor will help them with shorter-term goals, such as paying off student loans and cash flow management. Once you’ve done your due diligence, found someone who fits the bill–and shows alignment with your financial goals–don’t be afraid to DTR it. Make it official by signing a financial advisor contract and be sure to meet with your advisor at least once a year, every year.
- Working with a financial advisor is advantageous at any time, but you may want to wait until you have enough money to comfortably cover the associated fees.
- Once you’ve decided to retain a financial advisor, determine the services you need, your investment style, and what you’re willing to pay for their services.
- Be sure to vet financial advisors; interview them by asking them the three key questions above.