Are Financial Advisors Worth My Money? (2024)

A financial advisor can help you plan for retirement and provide investment advice to grow your wealth. But working with an advisor is a long-term commitment that requires time and money.

Before deciding if hiring a financial advisor is the right move, you need to ask yourself a few questions. Where are your finances right now? What financial goals do you want to achieve? What else do you need help with?

What Do Financial Advisors Do?

A financial advisor works with clients to set financial goals and build an investment portfolio to meet those objectives. Common goals include retirement, college planning, home buying or starting a business.

It’s important to note the distinction between a financial advisor and a financial planner. These professionals offer similar services, but financial advisors tend to offer broader advice on everything from investments to insurance, while financial planners usually target their services to more narrow categories.

While financial advisors typically have lots of experience managing money, it’s always best to choose an advisor with the certified financial planner (CFP) professional title.

To earn a CFP certification, advisors are required to take specialized courses and pass exams. They are bound by a code of ethics and standards of conduct enforced by the CFP Board, which includes adhering to a standard of fiduciary duty that requires them to put their clients’ best interests first.

Be sure to understand if the financial professional you want to work with is an advisor or planner—and how they get paid—before using their services.

How Much Do Financial Advisors Cost?

Financial advisors charge a wide variety of different fees. Some financial advisors cost more than others based on their credentials, but they are usually paid in one of three ways.

1. Advisory fees. If you plan to work with an advisor for a long period of time, opting for an advisory fee allows you to pay either a percentage of assets under management or a flat fee.
2. Hourly or project fees. As the name implies, advisors charge a specific amount per hour worked or a flat fee based on a specific project. Setting up an hourly or project-based payment is good when you plan to work with an advisor for a one-time project.
3. Commissions. If you’re working with a advisor to purchase a specific product, like life insurance, the advisor may earn a percentage commission from your purchase.

Pros & Cons of Hiring a Financial Advisor

Advantages of Financial Advisors

• Advisors offer investment advice and identify what sort of financial obstacles you’re facing. They help you build wealth and achieve financial independence. They can make plans for investment management, budgeting, taxes, retirement and estate planning.
• For all or any of the points above, they can build a streamlined and comprehensive plan that offers consistent implementation and check-ins throughout the journey.
• Financial advisors offer you a valuable sounding board to help you avoid financial detours.
• More than anything, advisors save you from having to face these challenges on your own. As a non-specialist, you probably lack the insight on these topics.
• They provide the peace of mind that you’re doing everything you can to achieve your financial goals.

Challenges of Financial Advisors

• Potentially high fees that can end up costing a great deal of money over the course of a relationship that’s meant to last for many years.
• You need to take plenty of time to research and interview the right professionals. This is not a task to enter into lightly.
• Once you have hired a financial advisor, you’ll need to continue putting in time meeting with your partner, and implementing and following up on your financial plan.

Do I Need a Financial Advisor?

You don’t need to have a large amount of assets or a specific financial issue to work with a financial advisor.

When you do your research and find the right professional, just about anyone can benefit from working one.

This is especially true if you aren’t comfortable making financial decisions on your own, or need help navigating a specific investment decision.

Related: Should I Get a Financial Advisor?

What to Ask a Financial Advisor?

When deciding which advisor to work with, it’s essential to ask the right questions to help determine which professional will best meet your needs. Here are some questions to ask a financial advisor:

• What is your fee structure? This will help you gauge what you can expect to pay to work with the person, and if their fee structure is suitable to you.
• Are you a fiduciary? This will help you determine if the advisor will always have your best interests in mind when planning your finances and offering advice.
• What are your qualifications? You get a feel for the person’s background before walking into a meeting, but asking this question gives you an opportunity to talk more about their journey and reasons for becoming a financial advisor to begin with.
• What services can you offer me? This is especially helpful if you need advice or guidance around particular financial issues, like retirement or college savings, working off debt or saving for a home.
• What’s your investment philosophy? If you’re working with an advisor to help you form investment decisions and save for retirement, you’ll want to ensure that your philosophies on the subject are the same. This is also a good time to bring up any specific investment philosophies you have, like avoiding specific companies or putting your money behind investments that champion specific causes, like sustainability or diversity.
• How often are you in touch with current clients? This question can help you get a feel for how the advisor plans to stay in touch and follow through with any financial advice they offer.
• Are there any current clients of yours I could speak with? If you can find an advisor based on references from family and friends that’s great, but if you find someone through your own research, be sure to reach out to clients they’ve worked with in the past to get their opinions.

Are Financial Advisors Worth It?

It depends on your unique financial circ*mstances, but more often than not it’s worth spending the time and money to work with a financial advisor.

If you’re having a hard time making financial decisions on your own or aren’t sure where to start with your economic journey, working with a financial advisor may be worth it.

However, if you’re already on a solid financial path and don’t mind—or even enjoy—researching the best products for your needs, you might not benefit much from teaming up with a financial advisor. If you already follow a retirement plan or don’t have a significant amount of debt to pay off, then you may not need expert advice.

If you do decide to work with a financial advisor, it’s important to find one that aligns with your money principles and philosophy. For example, if you strive to be an ethical investor, you’ll want to pick an advisor who has knowledge of ethical investing and will be able to tailor your portfolio to these specific needs.

You should also work with a financial advisor who won’t push you to work toward your financial goals faster than you’re comfortable with.

Ultimately, whether or not a financial advisor will be worth your money depends on your specific situation and the financial advisor you choose to team up with. If they align with your goals, listen to your needs and act in your best interests, they will most likely be a good financial investment.

Hiring a Financial Advisor

There are many financial advisors out there, which can make the process of finding one to work with overwhelming. But don’t worry—many professional financial planning associations offer free databases to make it easier to find a financial advisor. These include:

• National Association of Personal Financial Advisors (NAPFA)
• Garrett Planning Network
• XY Planning Network
• Alliance of Comprehensive Planners (ACP)
• Let’s Make a Plan (CFP)

If you’re concerned about the cost of teaming up with a financial advisor, consider working with a robo-advisor. These self-operating software platforms automate investing and manage your portfolio for you based on your goals. Some also allow customers to add personalized financial planning from a real financial professional for an additional cost.

Robo-advisors are great tools to help you manage other aspects of your financial picture, too, with several offering more traditional banking services like cash management accounts and savings accounts.

Deciding to work with a financial advisor is a personal decision everyone must make for themselves. Using the above considerations can help.

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