What to know about fee only financial advising

When you think of a household, many of the services and products used by the members of the household are shared. This could be vehicles, healthcare, streaming subscriptions, etc. From a banking perspective, we are interested to learn whether this idea of “householding” is attractive to young adults and dependents. You might not mind sharing a Netflix account with the rest of the household, but does this hold true when it comes to a financial advisor?

Deliverables

Please respond to the following questions about the concept of financial “householding.”

1) Would you like to have the same financial advisor as the other members of your family? Why or why not?

2) What types of conversations would you like to have with a financial advisor to address the most important financial topics in your life?

3) If your family had a household financial advisor:

How and when would you want to be introduced to the family’s advisor?

What would be your preferred way to communicate with the family’s advisor?

4) If your family got a household financial advisor, what else could make it an ideal experience for you?

Fee-only advisors do not receive any product sale commissions, such as those through the sale of life or disability insurance, mutual funds, or annuities. kate_sept2004/Getty

Fee-only advisors give financial planning advice to individuals and couples for a set fee based on the services they provide you.

Fee-only advisors do not receive commissions from the sales of products.

Fee-only and fee-based advisors have several differences to consider when deciding which type of advisor to work with.

Read more stories from Personal Finance Insider.

Seeking a professional to help you manage your money is a great step to achieving your financial goals. But not all financial advisors are the same; some may offer varying services — and more importantly, they may have different fee structures.

A fee-only financial advisor will be one you'll come across during your search. Here's what to know.

What is a fee-only financial advisor?

A fee-only financial advisor is an advisor that's paid on a set rate based on the services they provide a client, rather than being paid based on commission. These types of advisors act as a

fiduciary

, meaning that they're required to make recommendations that are in a client's best interest. While that seems like common sense, a lot of other advisors only act on a suitability basis, meaning that they only have to provide recommendations that are suitable for a client's situation.

Fee-only advisors provide the following services

Listening to and giving advice on a client's financial situation

Implementing the client's plan

Managing the client's assets on an ongoing basis

Quick tip: While Certified Financial Planners (CFPs) can also have fee-only practices, it's important not to confuse the two. Although CFPs take a fiduciary oath to put their clients' needs first, they may still be able to receive commissions depending on the firm that they work for. This can cause potential conflict of interest, as selling certain products or services to a client will provide income to the advisor.

What's the difference between fee-only and fee-based?

There are a few differences between fee-only advisors and fee-based advisors. Fee-only advisors do not receive any product sale commissions, such as those through the sale of life or disability insurance, mutual funds, or annuities. They charge clients a fee for their expertise and advice, and the opportunity to work together.

Quick tip: Fee-based advisors also charge clients a fee to work with them and have access to their expertise — but they also receive commissions from the sales of products. Although they may be acting in their client's best interests, receiving compensation for the sale of products can create a conflict of interest for their clients

Fee-only advisors can be paid in a number of ways including:

An hourly rate: Advisors are paid per hour for service provided.

A retainer fee: Clients pay an ongoing fee to continue the advisor-client relationship.

A percentage of assets under management (AUM): Advisors take a certain percentage, such as 1%, of all assets a client has under their management.

A flat fee: Some advisors choose to charge a flat fee, typically paid monthly, semi-annually, or annually

Fee-based advisors can be paid in a number of ways including:

Commission-based model: Fee-based advisors can receive a fee from the sale of insurance and investment products.

A combination of a commission and fee model: Fee-based advisors can receive a fee from the sale of products as well as a fee to give the client advice.

Through a percentage based on assets under management (AUM): Like fee-only advisors, fee-based advisors can also charge a fee based on the amount of assets they manage for a client.

Through an hourly or retainer model: Like fee-only advisors, fee-based advisors can also charge an hourly or ongoing fee for their advice.

There are oftentimes downfalls of working with fee-based advisors, mostly because they can still make commission off of product sales. "One [drawback] of working with a fee-based advisor is that there exists an inherent conflict of interest," says Scott Turner, CFP and fee-only advisor at Rockstar Financial Planning. "You can't tell if they are offering the best products, or they are only limited to selling their own proprietary/limited products offered by the company they work for or represent."

Pros and cons of fee-only financial advisors

There are several pros and cons to fee-only financial advisors

Pros of fee-only:

Fewer conflicts of interest: Because fee-only advisors don't accept payments on the sale of investment or insurance products they are able to make recommendations without the lure of receiving payment for such recommendations.

Follow a fiduciary standard: Because there are fewer conflicts of interest, fee-only advisors make recommendations that are in the best interest of the client, holding them to a fiduciary standard.

Client knows fees ahead of time: Fee-only advisors discuss how they are paid with their clients ahead of time, either by an hourly rate, ongoing fee, flat fee or percentage of assets under management.

Cons of fee-only:

More expensive to work with: For those who need basic saving or budgeting advice, or want to purchase an investment or insurance product and don't mind paying fees, then it may be less expensive to work with a different type of advisor.

Will need to find products elsewhere: "Fee-only advisors don't typically sell insurance, so they refer clients to a third-party insurance broker or salesperson. A fee-based advisor can often sell insurance directly to clients (although it might not be the best policy for the client)," states Matthew Jenkins, CFP and president of Noble Hill Planning, a fee-only financial planning firm

The financial takeaway

Working with a fee-only financial advisor can be a great way for clients to get fiduciary financial advice that's in their best interest. However, not all clients will be able to afford the fee to work with an advisor or can justify the fee they may charge to manage the client's assets. While working with a fee-based advisor is also an option, potential clients need to understand the fees they charge and how they get paid in order to determine if it will be a good fit.

"Working with a fee-only advisor minimizes conflicts of interest, but just because someone is a fee-only advisor does not inherently mean they have the particular expertise you are looking for," says Brandon Renfro, CFP and owner of Belonging Wealth Management. "You still need to vett a fee-only advisor to make sure they have the appropriate education and training to help you

Why Advisers Should Communicate with Clients’ Adult Children

From family meetings to providing resources, advisers need a strategy for helping their clients’ adult children.

According to research by asset management research firm Cerulli Associates, only about 13% of adult children of affluent aging clients chose to work with their parent’s financial adviser. About 88% of those who chose not to work with their parent’s adviser never even considered doing so.

This is during the greatest intergenerational transfer of wealth in history. As an adviser it's important for you to connect with clients’ adult children if you’d like to work with them and retain their assets.

Family meetings

Many financial advisers who are successful at retaining the assets of their client’s children, and those of a client’s widowed spouse if applicable, use family meetings as a way to build their connection to the client’s family.

These meetings might discuss shared family financial goals, they can be a good way for the family matriarch and patriarch to communicate their plans to transfer their wealth to the next generation. This will generally be the result of the planning work you’ve already done with your clients. Communicating with and getting to know your client’s adult children through these types of sessions can build trust and rapport with them

Depending upon their situation and their age, you might even end up working with these adult children long before their parents pass away.

Adapt Your Practice

While your older clients typically fit the mold of wanting to do in-person meetings with you throughout the year, the next generation often does things a bit differently. Depending upon their age, many of your clients’ adult children are accustomed to using technology in most facets of their life. They will expect their financial adviser to communicate with them via technology in many cases.

For financial advisory practices that plan to continue on into the future servicing this next generation of clients, embracing technology as a client communication tool is important. To the extent that you communicate with your client’s adult children prior to their deciding whether or not to become clients, incorporating technology into these communications will help distinguish you as an adviser who is easy to work with.

Adult Children Are not Their Parents

In connecting with your client’s adult children, it's important to realize that their adult children are distinct individuals with their own ideas on things, including their wealth management issues

In communicating with your clients’ adult children, try to learn about what’s important to them, what their priorities are. Many of these might be similar to their parents but invariably they will have their own ideas about what’s important to them in life and in their finances.

This is probably true of each succeeding generation. In cultivating this group, it's important to treat them as the distinct, independent individuals that they are. Treating them as individuals rather than as the children of your clients shows respect and that you value them and their opinions. While this is no guarantee of landing them as clients, taking this approach in all dealings with them is certainly a step in the right direction.

Position Yourself as a Resource

When interacting with a client’s adult children it’s a good idea to position yourself as a resource. Don’t start out with a sales pitch to try to retain the assets they will eventually inherit. Make yourself available to them to answer their financial questions at all stages of their lives. This might start when they get their first job and don’t know how to invest their 401(k). It might continue as they switch jobs and wonder what to do with their old 401(k), or perhaps when they get married and have children. In the latter case, they may have questions about college savings vehicles such as 529 plans.

If they see you as part of the family and as someone who is helpful and welcomes their questions, you will be the logical choice for advice when they inherit their parent’s assets.

Financial advisers who wish to retain the assets of their clients after they pass them on to their adult children need to build a strategy to connect with these prospective clients long before they inherit this money. Cerulli Associates pegs this wealth transfer at $68 billion over the next 25 years. If your firm wants its share, the time to develop a strategy to win over this next generation is now.

How To Choose A Financial Advisor

Do you need help managing your money? If you’re like many Americans, you might need a hand. According to the National Financial Education Council, a lack of personal finance knowledge costs the average American $1,200 a year.

Finding a good financial advisor can help you avoid these costs and focus on goals. Financial advisors aren’t just for rich people—working with an advisor is a great choice for anyone who wants to get their personal finances on track and set long-term objectives. Follow these steps to find the right financial advisor for your needs.

1. Decide What Part of Your Financial Life You Need Help With

Before you speak to a financial advisor, decide which aspects of your financial life you need help with. When you first sit down with an advisor, you’ll want to be ready to explain your particular money management needs.

Keep in mind that financial advisors provide more than just investment advice. The best financial planner is the one who can help you chart a course for all your financial needs. This can cover investment advice for retirement plans, debt repayment, insurance product suggestions to protect yourself and your family, and estate planning.

Depending on where you are in life, you may not need comprehensive financial planning. People whose financial lives are relatively straightforward, like young people without families of their own or significant debt, might only need help with retirement planning.

People with complex financial needs, however, may need extra assistance. They could be looking to establish college funds or trusts for their children, navigate aggressive debt payment situations or solve tricky tax problems. Not all types of financial advisors offer the same menu of services, so decide which services you need and let this guide your search.

2. Learn About the Different Types of Financial Advisors

There’s no federal law that regulates who can call themselves a financial advisor or provide financial advice. While many people call themselves financial advisors, not all have your best interest at heart. That’s why you have to carefully evaluate potential financial advisors and make sure they are good for you and your money.

Part of learning about the different types of advisors is understanding fiduciary duty. Some, but not all, financial advisors are bound by fiduciary duty, meaning that they are legally required to work in your financial best interest. Other people who call themselves advisors are only held to a suitability standard, meaning they only must suggest products that are suitable for you—even if they’re more expensive and earn them a higher commission. (The SEC is trying to regulate this, though, by limiting the use of “advisor” to those who hold themselves to a fiduciary standard.)

Regardless of which kind of advisor you choose, you should make sure you know how they earn money. This helps you determine if their recommendations are actually better for you—or for their wallets.

Here’s how to think about the different types of financial advisors:

Fee-Only Financial Advisors

Fee-only financial advisors earn money from the fees you pay for their services. These fees may be charged as a percentage of the assets they manage for you, as an hourly rate, or as a flat rate.

Almost all fee-only advisors are fiduciaries. Generally speaking, they have chosen to work under a fee-only model to reduce any potential conflicts of interest. Because their income is from clients, it’s in their best interest to make sure you end up with financial plans and financial products that work best for you.

Financial Advisors Who Earn Commissions

Some financial advisors make money by earning sales commissions from third parties. Among financial advisors that earn sales commissions, some may advertise themselves as “free” financial advisors that do not charge you fees for advice. Others may charge fees, meaning they derive only part of their income from third-party commissions.

Either way, financial advisors who earn third-party sales commissions derive some or all of their income from selling you certain financial products. If you choose to work with a financial advisor who earns sales commissions, you need to take extra care.

Commission-only advisors are not fiduciaries. They work as salespeople for investment and insurance brokerages, and are only held to suitability standards. In contrast, some fee-based financial advisors are fiduciaries, though it’s important to determine if they’re always acting as fiduciaries or if they “pause” fiduciary duty when discussing certain types of products, like insurance.

Keep in mind, commissions aren’t bad in and of themselves. They’re not even necessarily red flags.

Some financial products are predominantly sold under a commission model. Take life insurance: A fee-based planner who receives compensation for helping you purchase a life insurance policy may still have your best interests at heart when advising on other financial products.

“To be clear, there’s nothing wrong with paying the commission for life insurance,” says Karen Van Voorhis, a fee-based certified financial planner (CFP) and Director of Financial Planning at Daniel J. Galli & Associates in Norwell, Mass. “That’s how the structure of that industry works.”

Purchasing financial products via financial advisors that earn commissions may be a matter of convenience, especially if someone will receive a commission regardless of where you buy the product. What’s important is understanding the difference. And if you work with a fee-based financial advisor, understand when they are acting as a fiduciary, especially when they help you purchase financial products.

Registered Investment Advisors

Registered Investment Advisors (RIAs) are companies that provide fiduciary financial advice. RIAs employ Investment Advisor Representatives (IARs), who are bound by fiduciary duty. An RIA may have one or hundreds of IARs working for it.

IARs may call themselves financial advisors, and may be fee-only or fee-based. Some may have additional credentials, including the certified financial planner (CFP) designation.

“The certified financial planner designation is really the gold standard in the financial planning industry,” says Van Voorhis. A CFP designation indicates a financial advisor has passed rigorous industry exams covering real estate, investment, and insurance planning as well as has years of experience in their fields.

Because of their wide range of expertise, CFPs are well suited to help you plan out every aspect of your financial life. They may be particularly helpful for those with complex financial situations, including managing large outstanding debts and will, trust, and estate planning.

Robo-Advisors

Robo-advisors offer low-cost, automated investment advice. Most specialize in helping people invest for mid- and long-term goals, like retirement, through preconstructed diversified portfolios of exchange traded funds (ETFs).

“For younger people who are really tech savvy, a robo-advisor just to manage retirement funds could be a perfect solution,” says Brian Behl, a CFP at Behl Wealth Management in Waukesha, Wisc. “I don’t think they’re going to get as in-depth advice on insurance and retirement and taxes.”

People with complex financial needs should probably choose a conventional financial advisor, although many robo-advisors provide financial planning services a la carte or for higher net worth clients.

“While the robos have really disrupted the industry…I do think there’s still a place for human advisors right now,” says Corbin Blackwell, a CFP at robo-advisor Betterment.

Betterment, for example, allows clients to purchase individual financial advising sessions, and Personal Capital, Wealthsimple, and Betterment provide regular financial planning for clients with higher account balances for a management fee.

3. Choose Which Financial Advisor Services You Want

Services offered by financial advisors vary from advisor to advisor, but advisors may provide any of the following:

Investment advice. Financial advisors research different investment options and make sure your investment portfolio stays within your desired level of risk.

Debt management. If you have outstanding debts, like credit card debt, student loans, car loans, or mortgages, financial advisors will work with you to chart a plan for repayment.

Budgeting help. Financial advisors are experts in analyzing where your money goes once it leaves your paycheck. Advisors can help you craft budgets so you’re prepared to reach your financial goals.

Insurance coverage. Financial advisors may examine your current policies to identify any gaps in coverage or recommend new types of policies, like disability insurance or long-term care coverage, depending on your financial situation.

Tax planning. Tax planning involves strategizing ways to decrease the amount of taxes you may pay, like by large charitable donations or tax-loss harvesting. Keep in mind that not all financial planners are tax experts and that tax planning is different from tax preparing. You will probably still need a CPA or tax software to file your taxes.

Retirement planning. Financial advisors can help you build funds for the ultimate long-term goal, retirement. And then, once you’re retired or nearing retirement, they can help ensure you’re able to keep your money safe.

Estate planning. For those who wish to leave a legacy, financial advisors can help you transfer your wealth to the next generation, whether that’s family, friends, or charitable causes.

College planning. If you hope to fund loved ones’ educations, financial advisors can craft a plan to help you save for their higher education.

In addition to investment management and financial planning, financial advisors also offer emotional support and perspective during volatile economic times. During the beginning of the coronavirus pandemic in March of 2020, for instance, client demand for financial advisor contact increased by almost 50% .

“I think that during these times, we can be a source of reason,” says Blackwell. “We can weather the storm. We’ve built this portfolio for a reason.”

When choosing a financial advisor, make sure they offer the services you’re looking for in your financial and non-financial lives.

Decide How Much You Can Pay Your Financial Advisor

It used to be that financial advisors charged fees that were a percentage of the assets they managed for you. Today advisors offer a wide variety of fee structures, which helps make their services accessible to clients of all levels of financial means.

Commission-only advisors may seem free on paper, but they may receive a portion of what you invest or purchase as a payment. These “free” financial advisors typically are available through investment or insurance brokerages. Remember, these advisors may only be held to suitability standards, so they may end up costing what you would pay for a similar financial product suggested by a fiduciary financial advisor—or more.

Fee-only and fee-based financial advisors may charge fees based on the total amount of assets they manage for you (assets under management) or they may charge by the hour, by the plan, through a retainer agreement, or via a subscription model. Common average financial advisor fee rates are listed in the table below

Research Financial Advisors

Because financial advisors come in many forms with many different specialties and offerings, you need to thoroughly research potential advisors. You want to make sure the person guiding your financial decisions is trustworthy and capable.

You can find good financial advisors a couple of ways. Ask friends, family and peers for recommendations. Alternatively, look for financial advisors online. Many professional financial planning associations provide free databases of financial advisors:

NAPFA (The National Association of Personal Financial Advisors)

Garrett Planning Network

XY Planning Network

ACP (Alliance of Comprehensive Planners)

When evaluating advisors, be sure to consider their credentials as well as research their backgrounds and fee structures. You can view disciplinary actions and complaints filed against financial advisors using FINRA’s BrokerCheck. And remember, just because someone is a part of a financial planning association, that doesn’t mean they’re a fiduciary financial advisor.

Questions to Ask a Financial Advisor

In your first meeting with a financial advisor, make sure you learn the answers to these questions and that you’re comfortable with their responses.

Are you a fiduciary?

Are you always acting as a fiduciary? (Some fee-based advisors may not always act as fiduciaries when selling commission-based products.)

How do you make your money?

What is your approach to financial planning?

What financial planning services do you offer?

What kind of clients do you normally work with?

Do you have any account minimums?

Do you have any conflicts of interest in managing my money?

What information do I need to bring for you to look at when developing my financial plan?

How many times and how often will we meet?

Will you collaborate with my other advisors, like CPAs or attorneys?

The Bottom Line

Because of the ambiguity in the industry, you have to exercise caution to make sure you get the right financial advisor who meets your fiduciary and financial needs. That said, when you find the right financial advisor for you, they can help you achieve your financial goals and financially protect your loved ones and their futures.

“So much of what I do in a life-centered approach to financial planning and wealth management is walk out life with people,” says Wes Brown, a CFP at CogentBlue Wealth Advisors in Knoxville, Tenn. “I think there’s value in an ongoing relationship where somebody can help you walk through the various waypoints you’re going to come to

Do I Need A Financial Advisor Or Should I Do It Myself? Here’s When It’s Worth It To Get A Financial Advisor

The age-old question: are financial advisors worth it? Deciding whether to get a financial advisor or manage your own investments is a big decision. Not everyone needs an ongoing relationship with a financial planner or investment advisor. But many investors who would benefit from working with a wealth advisor don't seek professional advice or mistakenly think they don't need it. Here are a few signs that you may need a financial advisor.

If you're not working with a financial advisor, will you really do it yourself?

Properly managing your investments and making the right financial decisions takes time, skill, and effort. It's not a one-time thing, either. For now, let's set aside the skills, we'll get to that later. Time is our most precious commodity. There are plenty of things in life you could do, maybe run a marathon or learn a new language, but it doesn't mean you're going to do it.

Busy executives, business owners, working parents, and caretakers have a lot on their plate. Finding time to research financial questions, evaluate your options, and execute a decision takes time. (Perhaps this is why over half of 401(k) investors are invested in just one target-date fund!)

Even if you could make the time, perhaps you'd rather not if it takes time away from other things you rather do. Personal finance isn't interesting to everyone! And it doesn't have to be. But if you're neglecting your finances, it's likely worth it to hire a wealth advisor. Time is money, and there's a cost to delaying good financial decisions or prolonging poor ones, like keeping too much cash or putting off doing an estate plan.

If you're wondering if you need a financial advisor or if you should do it yourself, consider whether DIY investing is a realistic option. What changed so you now feel you can devote more time and energy to your investments than you have before? Do-it-yourself can easily turn into no-one-does-it. We all have a home project or two to prove it. So if your to-do list is endless and you never quite have time to tackle your personal finances, you might need a financial advisor

If your strategy is a blend of winging it and Google

We don't know what we don't know. If you're just Googling for answers to specific questions, how will you know you didn't miss anything? We often find the greatest risks facing a new client weren't even on their radar.

Our financial lives are complex and inter-related. Pulling one lever can have unintended consequences in another aspect of your life. How can you be sure you're going to get the best outcome if you haven't done it before? Often, what makes a financial advisor worth it is their ability to keep you on track and proactively identify financial risks and opportunities for you. We value experience in nearly every aspect of life, don't discount it when it comes to managing your life savings.

Your finances are disorganized, and you don't know where you stand

If your accounts are scattered across multiple institutions, it's hard to know where you stand financially. Particularly if you don't have a saving or investment strategy. This is another situation where it's probably worth it to get a financial advisor instead of doing it yourself. For starters, an advisor can help you move or consolidate old 401(k)s, IRAs, and brokerage accounts in one spot or at least as few as possible.

There's a lot that goes into your financial position. Perhaps you're a victim of lifestyle inflation or just don't have a grasp on your spending at all. It's really important to know where you stand financially. Especially if you are afraid of the answer.

During this process, you can also discuss developing a cohesive investment strategy and understand how you're tracking towards your goals. Getting organized and building a strategy going forward is a critical step. But it doesn't just end there. People often need help implementing it, staying on track with savings goals, or revising plans when things change.

One-time financial health checkups typically fail. Getting on the right track is an important first step, but unless you're just starting to save for retirement, insular advice will likely fall short of what you really need. Without ongoing support, recommendations likely sit idly in a desk drawer. And changes to your personal financial life keep coming. New laws, like the Secure Act, can require strategy changes, while a decline in your account could be a tax-loss harvesting opportunity.

It's worth it to get a financial advisor before you make a life-changing decision

We have a lot of flexibility to unwind many of the decisions we make. But you can't always rely on a take-back, especially for major financial decisions. You'll need the tools, experience, and objectivity a financial advisor brings to help you make the best decision the first time. Because you might not get another chance.

Deciding to retire, take an early retirement buyout package, sell a business, take a lump sum over a pension, start Social Security, or buy a home with cash are some examples of major financial decisions. You may also be making a major decision by taking no action at all. For example, if you exercise stock options but don't have a plan to sell and diversify, you risk your entire on-paper windfall if the stock sinks.

There's no good reason to shoot from the hip with so much at stake. A wealth manager can help you quantify the decision, understand the impact on other areas of your life, and assess your alternatives. It's often worth it to build a financial plan to help with the decision making process.

A comprehensive financial plan can help you make big financial decisions

A financial plan helps accomplish four main objectives:

Answer the big questions. If you're contemplating a big decision like can I retire at the end of the year, should I use a windfall to pay off my mortgage early, or how much do I need to save to retire and maintain my lifestyle, a financial model is the best way to evaluate the goal and compare alternatives.

Incorporate the various 'side effects' of making a decision about your money or investments, like tax implications or funding one goal at the expense of another. Our financial lives are incredibly intertwined. Looking at it in a vacuum won't give you the whole picture. The only way to pull it all together is through a financial plan.

Considering and quantifying alternate paths using what-if analysis. Who doesn't like options? Maybe you have your heart set on retiring at 55. Wouldn't you want to know what your retirement budget could be if you worked another two years?

Stress-test your plan with a risk simulation to help ensure you don't run out of money. By accounting for the variation in investment returns, a risk simulation can help investors feel confident knowing the probability that their plan will succeed.

This is another part of financial planning and investing where you really need a financial advisor. If you're not working with a professional, there's no guarantee you're asking yourself all the right questions or haven't overlooked anything.

If getting a financial advisor would give you peace of mind or reduce money stress, it's worth it

There are a lot of reasons investors choose to work with a money manager or financial planner. One reason is the peace of mind it gives individuals and their families. If busy working executives don't have time to oversee their investments, it can become a source of stress. Or perhaps a retiree is always worrying about overspending or running out of money. And if something happens to the breadwinner and financial manager of the household, who will the surviving spouse and/or children turn to for help and guidance?

Every day, people decide they need a financial advisor to address these and other money concerns. Worries or disagreements about finances are among the top stressors for individuals and couples alike, so these issues are very real. So too are the consequences for inaction.

Finally getting your finances in order, ensuring family is cared for, or getting a grasp on your retirement plan can be empowering and liberating. Reducing or removing this source of anxiety can make working with a financial advisor worth it.

Ok, I need a financial advisor. Where do I begin?

Unfortunately, sometimes figuring out you need a financial planner is the easy part. Navigating the sea of financial advisory firms, services, and fee models can feel overwhelming. Here are the top questions investors typically have when looking for a financial advisor.

What's the difference between a financial advisor, wealth manager, financial planner, investment advisor, etc?

There are many synonyms for financial advisors. While there are some restrictions on who can call themselves an advisor (or adviser), it's usually easiest to set the individual's chosen title aside. Instead, focus on the other aspects, like services, firm structure, credentials, personality fit, fees, and so on.

How will I know my advisor is acting in my best interest?

Not all advisors are held to the same standards. A fiduciary duty is the highest standard of care under the law. Only registered investment advisors always have a fiduciary duty to act in your best interest. Other types of advisors may not be held to a fiduciary standard at all or only at certain points in the relationship, but they're not a full-time fiduciary.

How are financial advisors paid?

Compensation methods vary between advisors. There three main types of fee structures:

Fee-only: A fee-only advisor is only paid by their clients; they do not sell products. Fees are most often based on a percentage of investment assets the advisor manages. So as your accounts grow, the advisor does better too. The fee-only financial advisor model is typically considered the most transparent and least likely to create conflicts of interest between the client and the advisor, as sales-based incentives are removed. While many fee-only financial advisors are registered investment advisors (and fiduciaries), it is possible for a firm to be one and not the other.

Fee-based: Fee-based advisors are typically paid in two ways: a percentage of the investor's assets under management and by commissions from selling products, such as life insurance, annuities, mutual funds, or other investments. In a fee-based relationship, the client isn't the only one paying the advisor. They also receive commissions and referral fees by third parties.

Commission only: Some insurance agents, banks, stockbrokers, or large wirehouses may not charge the end client at all and rely on commissions from selling products instead. The relationship here will be the most transactional in nature and heavily focused on advice with a product-based solution.

How much will it cost me?

How much it costs to work with an advisor depends on the advisory firm, your situation and services. While cost is an important component, the cheapest option today might be the most expensive in the long run. Consider how advisory fees can be offset by the financial benefits an advisor can provide, and your alternatives. Due to differences in share classes, managing your own investments as a 'retail' investor can actually cost more.

The Vanguard Advisor's Alpha study aims to quantify the benefits of working with an advisor. They found an advisor has the potential to add a net return of about 3% for clients, through different advisory services and an ongoing relationship.

Are you a CERTIFIED FINANCIAL PLANNER™ professional?

There are no specific educational requirements for individuals offering financial advice and financial planning. So additional credentials and designations can be helpful. Of course, there are no shortage of acronyms here either. The CERTIFIED FINANCIAL PLANNER™ professional designation is typically considered the 'gold standard' for financial advisors as the Chartered Financial Analyst® designation is to asset management.

Your investments deserve more than thoughts and prayers

If your life savings need more attention than you can provide, it's worth it to get a financial advisor. Once you decide you need an advisor, try not to let it sink to the bottom of your list. It may not seem pressing, but life happens fast, and we never know what changes are on the horizon. On the whole, financial advisors enjoy helping people. Start the conversation to see how one can help you.