“Financial advisor” is a broad title. It can describe someone who builds a full retirement plan, someone who mainly sells investment or insurance products, or both. Before you choose, it helps to understand how advisors are paid, what their credentials mean and what kind of help you actually need.
This article is general information, not financial advice.
Key takeaways
- How an advisor is paid shapes the advice you receive.
- Check registration and disciplinary history before your first meeting.
- Ask for every fee in writing, expressed in dollars as well as percentages.
Common ways advisors are paid
| Fee model | How it works | Questions to ask |
|---|---|---|
| Percentage of assets | An annual fee based on the money they manage | What is the rate, and does it decrease as assets grow? |
| Flat or hourly fee | A set price for a plan or for time spent | What exactly is included in the plan? |
| Commission | Paid by product providers when you buy | Which products pay you more than others? |
| Combination | A mix of fees and commissions | Can you list every way you are paid on my account? |
What credentials can tell you
Credentials signal training and, often, an ethical code. Rather than memorizing acronyms, ask what the credential required, whether it is current and what standard of care the advisor follows when giving you recommendations.
You can look up many advisors and firms for free through FINRA BrokerCheck and the SEC’s Investment Adviser Public Disclosure website. These records show registrations, employment history and any disciplinary actions.
Know what kind of help you need
- A one-time plan for a life change such as a new job, an inheritance or retirement.
- Ongoing investment management if you would rather delegate day-to-day decisions.
- Specific expertise such as small-business retirement plans or education savings.
Questions for your first meeting
- Are you required to act in my best interest at all times?
- How are you paid, in total, if I become your client?
- Who will I work with day to day?
- How often will we review my plan, and what triggers an update?
- Where will my money be held?
FAQ
Is a lower fee always better?
Lower costs leave more of your money invested, which matters over time. But the right comparison is value: what services you receive for what you pay.
Do I need a lot of money to work with an advisor?
Not necessarily. Many planners offer hourly or project-based help with no minimum balance.
