How To Choose a Financial Advisor: A Step-by-Step Guide

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You don’t have to manage your finances alone. A good financial advisor can help you with everything from budgeting to complex investment strategies. This guide will show you how to choose a financial advisor who can support your long-term financial goals — and help you avoid costly mistakes.

What Does a Financial Advisor Do?

• A financial advisor helps you tackle money challenges, set new goals and stay on track.
• They can assist with budgeting, tax strategies and long-term investing.
• Some manage your portfolio directly, while others focus on providing guidance and financial planning advice.

How To Choose a Financial Advisor: 7-Step Guide

Here’s how to choose a financial advisor in seven simple steps:

• Step 1: Define your goals
• Step 2: Research advisor types
• Step 3: Check credentials
• Step 4: Compare fees
• Step 5: Interview 2 to 3 advisors
• Step 6: Verify the background of each advisor
• Step 7: Decide on an advisor and monitor the results

You’ll want to jump on a call with a financial advisor before deciding if they are right for you. However, you can narrow your search by looking for fiduciary advisors who have the right skills for your financial situation.

For instance, if you prioritizing estate planning, you should focus on advisors who offer that service.

Any testimonials you can find are nice bonuses, but you’ll get a good idea based on the first call. Pay attention to how you feel during the conversation and if the advisor quickly responds to your concerns.

Pro Tip

Fiduciaries are required to act in your best interests. Unlike commission-based advisors who may be incentivized to sell certain products, fiduciaries provide unbiased advice.

Choosing a fiduciary helps ensure you’re getting recommendations that truly benefit you — not just their bottom line.

Financial Advisor Credentials To Look For

Not everyone can be a financial advisor. You should check for specific credentials that indicate a professional has studied finance and knows more than the average person.

These are some of the top credentials:

• Certified Financial Planner (CFP):
  • This individual has a bachelor’s degree and more than 6,000 hours of experience. CFPs must pass the CFP exam and follow ethics guidelines. They can provide general financial planning services.
• Personal Financial Specialist (PFS):
  • This individual has a CPA license and has completed 75 hours of financial planning education. PFSs must pass a certification exam.
• Chartered Financial Analyst (CFA):
  • This individual has to pass three exams and accumulate professional experience. CFAs specialize in investment management.

How Financial Advisors Get Paid

Financial advisors adhere to different business models. It’s beneficial to stick with a fee-only fiduciary advisor to prevent any conflicts of interest.

Here are the different ways financial advisors get paid:

Questions To Ask a Financial Advisor

A financial advisor is a big investment, so it makes sense to ask as many questions as possible. However, some questions are more important than others.

According to the National Association of Personal Financial Advisors, here are some key questions to ask a financial advisor you’re considering hiring:

• How are you compensated?
• Do you itemize commissions, if applicable?
• Do you accept referral fees?
• Are you held to a fiduciary standard at all times?
• Are you willing to sign a fiduciary oath that states you’ll always put my interests first?
• Have you ever been disciplined by the Securities and Exchange Commission or the Financial Industry Regulatory Authority?
• Do you provide full-service financial planning or just investment management?
• Do many of the clients you work with fit my profile?
• Will you or an associate work with me?

How To Vet a Financial Advisor for Trust and Safety

When you’re ready to start searching for a financial advisor, ask friends and family members for names of advisors they trust. Or, check professional networking organizations such as:

• The Financial Planning Association
• National Association of Personal Financial Advisors
• The Garrett Planning Network for advisors in your area

Some banks also have financial advisors on staff.

How To Avoid Scams

Unfortunately, fraud is not uncommon in the financial planning and advice industry.

Before selecting an advisor, look up the person on FINRA BrokerCheck. If you can’t find your potential advisor in BrokerCheck, it’s better to use someone else.

Good To Know

Be on the lookout for any financial advisor — or anyone claiming to be one — who is involved in any of these potentially fraudulent activities:

• Claims to have special credentials or experience.
• Promotes limited-time offers with a sense of urgency.
• Offers guaranteed or overly consistent returns that don’t match market conditions.
• Refuses to explain the investment, including how it makes money and the potential risks.
• Promises large profits from a small investment.
• Requires an advance payment.

Are Financial Advisors Worth It?

Only you can determine if it’s worth it to pay a financial advisor. You may not need to pay an advisor if you’ve mastered the financial basics, such as:

• Saving at least 10% of your income
• Investing consistently for the long run
• Minimizing costs

However, if you’re just starting out — or, on the other side of the coin, if you’ve got a very complex financial life — an advisor may be more than worth it.

Final Take: Picking The Best Advisor For You

Choosing a financial advisor isn’t just about ticking off credentials — it’s about finding someone you trust with your financial future. Keep these points in mind:

• Focus on advisors who are transparent.
• Ask the right questions during your search.
• Use resources like FINRA’s BrokerCheck to verify their background.

For extra peace of mind, look for a fiduciary, fee-free advisor who’s committed to putting your best interests first.

John Csiszar and Cynthia Measom contributed to the reporting for this article.

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