How to Choose a Financial Advisor

When it comes to managing your finances, having the right guidance makes all the difference. Managing your financial life entails making critical decisions that impact not just your present lifestyle, but your financial future, your sense of security, and your overall wellbeing.

woman meeting with financial advisor

Whatever stage you’re at in your financial journey – whether you just started your first job or are in the final stages of planning for retirement – a financial advisor can play an integral role in helping you align your financial decisions with your goals.

However, the choices in financial advisors can be overwhelming. How do you choose the right one? We’ve outlined five easy steps that can help.

Key Takeaways

  • Clearly define your financial goals and needs, such as saving for a down payment or planning for retirement, to help guide your choice of advisor.
  • Understand the types of financial advisors, such as CFPs, CPAs, CFAs, RIAs, and robo-advisors, to find one whose expertise aligns with your specific financial requirements.
  • Conduct thorough research, including seeking referrals, reading reviews, and verifying credentials using tools like FINRA’s BrokerCheck.

Step 1: Define Your Financial Goals and Needs

Your financial goals and current needs are the compass guiding your choice of a financial advisor. Defining these can be tough, but this step will help you choose a financial advisor who can provide the right guidance for your unique financial situation.

Identify Your Financial Goals

Are you seeking assistance to save money for a down payment on a house, or are you more concerned with long-term retirement savings? Maybe you’re a parent planning for your child’s education, or you’re looking to maximize your investments.

Your goals could be as diverse as building an emergency fund, reducing tax liability, planning for a comfortable retirement, or leaving a legacy for your heirs. Take time to envision your short, medium, and long-term goals. These objectives will help shape the focus of your financial plan and determine the types of financial services you require.

Assess Your Financial Needs

Beyond setting goals, you need to assess your financial needs accurately. You want to understand your current financial situation, future financial commitments, and the complexity of your financial affairs.

For instance, if you’re self-employed or own a business, your financial needs may be more complex, encompassing areas like tax planning and business succession planning. Similarly, if you have a high net worth, you may need specialized wealth management services.

Life events such as marriage, parenthood, or impending retirement can also influence your financial situation. These milestones often come with financial implications that require professional advice to be handled properly.

Match Your Needs with the Right Services

Understanding your needs is half the equation. The other half involves matching these needs with a financial advisor who can help. The financial industry is vast, and advisors often specialize in different areas. We dive deeper into the types of financial advisors below.

Step 2: Understand the Types of Financial Advisors

A critical part of your journey in choosing a financial advisor is understanding the variety of financial professionals available in the industry. Each advisor comes with their unique expertise, specialties, and designations that cater to specific aspects of financial planning.

Understanding the strengths and certifications of these professionals can help you align with an advisor who meets your specific financial needs and objectives.

Certified Financial Planner (CFP)

CFPs provide comprehensive financial planning services. This involves addressing various aspects of your financial life, such as retirement, investments, insurance, tax, and estate planning. The journey to becoming a CFP involves passing rigorous examinations that test competence in these areas.

Furthermore, they must uphold the fiduciary standard, meaning they are ethically bound to act in the best interest of their clients. If you seek a holistic approach to financial planning, a CFP could be the ideal choice.

Certified Public Accountant

CPAs are trained in areas like tax law and accounting, making them proficient in offering tax advice and preparation services. If your focus is primarily on reducing tax liabilities, a certified public accountant (CPA) specializing in tax accounting might be the best choice.

Chartered Financial Analyst (CFA)

CFAs are the industry gold standard when it comes to investment management. They specialize in areas like portfolio management and financial analysis. Their rigorous training equips them with the skills to analyze and interpret complex financial and investment information, offering invaluable insights for high-net-worth clients, institutional investors, or those with intricate investment portfolios. CFAs are commonly employed by mutual funds and brokerage firms.

Registered Investment Advisors (RIAs)

RIAs are professionals registered with the Financial Industry Regulatory Authority (FINRA) or state authorities. They offer a wide range of advisory services, including retirement planning, portfolio management, tax planning, and estate planning.

If you are a high-net-worth individual or an institutional investor, you might benefit from the services of a registered investment advisor (RIA). RIAs are regulated by the Financial Industry Regulatory Authority (FINRA) or state securities regulators and provide a wide array of financial services, including personalized investment advice.

RIAs adhere to the fiduciary standard and are usually compensated by a fee based on the assets managed.


Robo-advisors are digital platforms that provide automated and algorithm-driven financial planning services. These platforms require minimal human intervention, making them efficient and cost-effective. To utilize a robo-advisor, individuals typically complete an online survey, providing information about their financial situation and investment objectives.

Using this data, the robo-advisor then generates personalized investment advice and automatically manages the allocation of assets in accordance with the specified goals. This automated approach is particularly attractive for individuals with straightforward financial needs who are looking for a cost-efficient way to manage their investments.

Understand Compensation Models

In addition to professional designations, it’s essential to understand how financial advisors are compensated, as it can influence their advice and create potential conflicts of interest.

  • Fee-only advisors: As the name suggests, fee-only advisors are compensated solely from the fees clients pay them. These fees could be structured as a flat fee, an hourly rate, or a percentage of the assets managed. Fee-only advisors do not earn commissions or kickbacks from selling financial products, which minimizes conflicts of interest.
  • Fee-based advisors: Fee-based advisors, on the other hand, earn money both from fees paid by clients and commissions from selling financial products or making certain referrals. While they can provide comprehensive services, this model could potentially introduce conflicts of interest. It’s important to ask fee-based advisors about how they manage these conflicts to ensure their advice aligns with your best interests.

Step 3: Do Your Research

Choosing the right financial advisor involves conducting thorough research, including seeking word-of-mouth referrals or reading online reviews, choosing a handful of prospective advisors, and verifying their credentials.

Use Referrals

Whenever you’re seeking a professional, it’s best to start by asking friends or family members you trust for referrals. Make sure to ask about their experiences, the advisor’s expertise, and their overall satisfaction with the services provided. While helpful, remember what works for one person may not work for another due to different financial situations and goals.

Leverage Professional Organizations

Professional organizations such as the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) offer databases to find certified and fee-only financial advisors, respectively. These platforms provide a starting point for identifying qualified professionals.

Verify Credentials and Background

It’s essential to verify your potential advisor’s credentials. Use tools like the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck to confirm their certifications, check their employment history, and see any disciplinary actions or complaints. Ensure the advisors hold a fiduciary duty, meaning they are legally required to act in your best interest.

Step 4: Interview Potential Advisors

Once you have a short list of potential advisors, the next step is to interview them. This is your opportunity to understand their investment philosophy, fee structure, and services.

During the interview, ask about their qualifications, investment approach, risk tolerance, and how they handle major life events. You also want to understand their fee structure. Most traditional financial advisors charge a management fee as a percentage of assets managed, but others might charge a flat fee or hourly rate.

You’ll also want to assess your comfort level with them. Ideally, a financial advisor should be someone with whom you can build a long-term relationship. After all, they will be handling your financial affairs. Trust and open communication are key.

Step 5: Review, Compare, and Make Your Decision

After interviewing, it’s time to review and compare your options. Take into consideration their responses, their fee structure, and how well they align with your needs and values. Also consider their past performance, though keep in mind that past performance doesn’t guarantee future results.

Once you’ve made your decision, the advisor will typically present you with a client agreement outlining their services, fees, and other important details. Make sure you read and understand this document before signing.

Engaging a financial advisor is not a one-time event, but an ongoing relationship. Regularly review your financial plan with your advisor and keep them informed about any changes in your life that could impact your financial goals.


Choosing a financial advisor is a significant step towards managing your financial future. It can be a challenging process given the array of financial professionals available, but with clear objectives, thorough research, and thoughtful consideration, you can find an advisor that aligns with your needs and goals. Don’t rush the process. After all, this decision can significantly impact your financial journey.

Finding the right financial advisor can help you simplify your financial life, make informed decisions, and ultimately, achieve your goals. As you begin this journey, remember that the advisor you choose should not only be competent in their field, but also a partner you can trust with your financial future.

Frequently Asked Questions

What do financial advisors do?

Financial advisors help individuals and businesses manage their money effectively. They provide a range of services that can include retirement planning, tax planning, estate planning, debt management, and investment advice. They help clients set goals, create a plan to achieve those goals, manage investment portfolios, and assist with financial decisions.

The role of a financial advisor can be diverse, and it often depends on the client’s financial situation and goals. Ultimately, a good financial advisor aims to guide their clients toward financial stability and success.

How often should I meet with my financial advisor?

The frequency of meetings with your financial advisor varies depending on your personal needs, financial objectives, and the complexity of your financial picture. Some clients may need to meet with their advisors quarterly, while others might only need an annual review. It’s best to discuss this with your advisor to determine a meeting schedule that best suits your needs.

How do I know if my financial advisor is doing a good job?

Evaluating the performance of a financial advisor can be subjective and depends largely on your goals and expectations. Some indicators can include whether your portfolio is meeting your investment goals, the quality and frequency of communication from your advisor, their ability to explain complex financial matters in understandable terms, and overall satisfaction with their services.

Can I switch financial advisors?

Yes, you can switch financial advisors if you’re unhappy with your current advisor’s services or feel that another advisor might better meet your needs. You can communicate your concerns with your current advisor first, but if issues persist, it might be time to consider a change. This is your financial journey, and you should feel comfortable with the person guiding it.

How much does a financial advisor cost?

The cost of a financial advisor can vary widely depending on their fee structure. Some advisors charge a flat fee, others charge an hourly rate, and some charge a percentage of the assets they manage for you. Some might earn commissions from selling financial products. It’s important to have a clear understanding of all costs involved before engaging an advisor’s services.

What is the difference between a financial advisor and a financial planner?

While these terms are often used interchangeably, there can be differences. A financial advisor is a broad term for professionals who help manage your money, including investment managers, tax professionals, and estate planners. A financial planner, on the other hand, typically refers to a professional who helps individuals and families create a comprehensive plan to meet long-term goals.

Dawn Allcot
Meet the author

Dawn Allot is a personal finance writer and content marketing expert specializing in finance, travel, real estate, and technology. In addition to her work at Crediful, Dawn regularly writes for Bankrate, GoBankingRates, and The Balance.