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Tuesday, July 8, 2025

When Is It Time to Hire a Financial Advisor?

 



Financial advisors aren't only for millionaires. 

If you wouldn’t use the term “wealthy” to describe yourself, you’re in good company. Most people don’t need a “wealth manager.” But middle-income families and individuals can benefit greatly from working with a financial advisor. Different financial professionals work with people of different net worths to help them meet personal goals. 


Money expert Clark Howard suggests a rule of thumb: if you have less than $50,000 to invest, or if you’re at least 20 years out from retirement, you don’t need a financial advisor. At that stage, just focus on accumulating and investing your money. 


Consider starting the search for a financial advisor if you’re asking any of these questions, and especially if they’re causing you stress.

  • How close am I to being able to retire? 
  • How much can I commit to paying for my child’s college?
  • I just received an inheritance. What’s the wisest way to invest this money today?
  • I’ve never tried to organize my finances. What don’t I know that I need to know?


Then, consider what support you need. Would you benefit from a birds-eye-view assessment of your entire financial life? Look for certified financial planning services. Are you focused on how to invest your portfolio? You might be able to get by with a robo-advisor, “automated investing platform” that analyzes the market and tells you where to put your money. Do you want help solving the problem of retirement or paying for college? It could be worth hiring a financial advisor. 


How do I choose a financial advisor?

First, understand the different pay structures. Some advisors (including robo-advisors) take a percentage of the assets they help you invest. That’s the Assets Under Management, or AUM, model. Other advisors are fee-based fiduciaries, meaning they charge a flat fee. Fee-based fiduciaries appeal to smaller investors, and many experts recommend only ever opting for this service model. The fees might be based on an annual retainer, a stand-alone financial plan, or an hourly consultation rate (usually $200 to $400). One sign of a good advisor is a transparent pricing plan that includes dollar amounts, payment schedules, and a clear explanation of the services rendered at each level. 


Next, ask around for referrals. A trusted source’s recommendation to a local advisor will be invaluable. A Google search for “fee-only fiduciaries near me” is another place to start, as is the Garrett Planning Network, where you can plug in your zip code for a list of local advisors. You can also search the website of the National Association of Personal Financial Advisors, or NAPFA, using their online tool. All of the advisors listed on NAPFA are fee-based, but they may have minimum requirements for the size of your assets. Another resource is the Alliance of Comprehensive Planners (ACP), which also allows you to search fee-based advisors.


Here are some green flags to look for during your financial advisor search. 

  • They’re a CFP. A Certified Financial Planner (CFP) has specialized training, passed a rigorous exam, and follows an ethics code for comprehensive financial planning. 
  • They pass a background check on BrokerCheck https://brokercheck.finra.org/. The Financial Industry Regulatory Authority (FINRA) runs this website to offer consumers a check on financial advisors’ work history and any “disclosure events,” or complaints made against them.
  • You feel comfortable with them. After an initial meeting, you should be feeling encouraged and enlightened, not baffled or worried. 
  • They’re free of conflicts of interest. Some advisors may earn a commission on financial products and therefore have an interest in selling them to you. Ask about whether the advisor stands to gain from any financial advice they give you. Another way to ask this question is to inquire as to whether they have a fiduciary interest to you as their client, meaning they’re professionally bound to put your interests ahead of yours. All CFPs are fiduciaries. 


A visit to a fee-based financial advisor is like a visit to the doctor. You can get a holistic check-up of your financial health, or you can ask specific questions like, “How will the health of my portfolio be affected if I make this contribution to my kid’s college fund?” Investing a little time and money into that visit will likely help you to feel less queasy about your financial health, and could place you in a much better position for the future. 




This article is not intended to be a substitute for professional financial advice from a qualified financial advisor.


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