Should I Get a Financial Advisor?
Deciding whether to hire a financial advisor is an important decision that can significantly impact your financial future.
With many factors to consider, from the benefits of hiring an expert to the potential costs and alternatives, this guide will help you make an informed choice.
We’ll look into the advantages and disadvantages of hiring a financial advisor, explore different types of advisors, discuss costs, and provide you with the necessary information to determine if you need professional assistance for your financial planning and investment needs.
Key Takeaways – Should I Get a Financial Advisor?
- A financial advisor can provide valuable expertise and personalized strategies to help you achieve your financial goals, but they may not be necessary for everyone.
- An advisor provides a guaranteed baseline of expertise with respect to a crucial life matter.
- For many, an advisor can help translate goals into concrete decisions, align perceptions with financial realities, clarify the full range of trade-offs and implications between choices, catch blind spots, and provide general oversight.
- Choosing the right financial advisor involves researching credentials, seeking referrals, and comparing fees and services offered by different professionals.
- Alternatives to hiring a financial advisor include self-education, using robo-advisors, or managing your own finances if you have the time and inclination to do so.
What Is a Financial Advisor / Certified Financial Planner (CFP)?
A Certified Financial Planner (CFP) is a professional designation awarded to financial advisors who have demonstrated expertise in comprehensive financial planning.
To obtain the CFP designation, an individual must complete a rigorous training program and meet several requirements. This typically include education, examination, experience, and adherence to a code of ethics.
A CFP is trained in the following areas:
Financial planning principles
This includes understanding the financial planning process, the role and responsibilities of a financial planner, and the importance of professional conduct and regulation.
Investment planning
CFPs are trained in portfolio management, risk management, asset allocation, and the selection of various investment products, such as stocks, bonds, mutual funds, and alternative investments.
Retirement planning
They learn how to assess clients’ retirement needs, evaluate different retirement strategies, and recommend appropriate retirement savings and income distribution strategies.
Tax planning
CFPs are educated in tax laws and regulations, strategies for minimizing tax liabilities, and the tax implications of various financial planning decisions.
Estate planning
They learn about estate planning tools and strategies, including wills, trusts, probate, estate tax, and gifting strategies, to help clients preserve and transfer wealth.
Risk management and insurance planning
CFPs are trained in identifying and evaluating potential risks, as well as recommending appropriate insurance products to manage those risks, such as life, health, disability, and long-term care insurance.
Education planning
They learn how to assess clients’ education funding needs and recommend suitable savings strategies, such as 529 plans, Coverdell Education Savings Accounts, or other investment vehicles.
Employee benefits
CFPs are knowledgeable about various employee benefits, such as retirement plans, stock options, and group insurance, and how they can be integrated into a client’s overall financial plan.
Debt management
They learn strategies for managing debt and evaluating the impact of various debt repayment options on a client’s financial plan.
Professional conduct and fiduciary responsibility
CFPs must adhere to a strict code of ethics and professional responsibility, ensuring they always act in the best interest of their clients.
Benefits of Hiring a Financial Advisor
A financial advisor can offer valuable expertise and guidance to help you achieve your financial goals.
The main benefits of hiring a financial advisor include:
Expertise
A financial advisor provides a guaranteed baseline of expertise with respect to a crucial life matter.
Financial advisors have extensive knowledge of investment strategies, tax planning, retirement planning, and more.
They can help you navigate complex financial situations and make informed decisions.
Time savings
Managing your own investments and financial planning can be time-consuming.
A financial advisor can save you time by handling these tasks on your behalf.
Personalized strategies
Financial advisors can develop a customized financial plan tailored to your unique needs and goals, taking into account your risk tolerance, income, and expenses.
Accountability
Having a financial advisor can keep you accountable for your financial decisions and help you stay on track to meet your goals.
Emotional support
Financial advisors can provide objective advice and support during market fluctuations, helping you avoid making impulsive or emotional decisions.
Protecting Clients from Misinformation
Finance, unfortunately, has this “hot take” ecosystem surrounding it where lots of wrong and misleading information is pervasively and confidently expressed.
As part of their training and professional experience, advisors are skilled at protecting clients from poor-quality advice and being misled by unqualified sources, especially the kind that’s confidently delivered but fundamentally wrong.
How Do You Choose a Financial Advisor?
Finding the right financial advisor is crucial to achieving your financial objectives.
Here are some steps to help you choose the best advisor for your needs:
Determine your financial goals
Identify your financial objectives before searching for an advisor. This will help you find a professional who specializes in the areas most relevant to you.
Research credentials
Look for advisors with relevant certifications:
The CFA (Chartered Financial Analyst) focuses on investment management, portfolio construction, and global financial analysis.
The CFP (Certified Financial Planner) specializes in personal financial planning, covering retirement, estate, tax, and insurance strategies. Has a more retail orientation, but provides broad knowledge.
The CTFA (Certified Trust and Fiduciary Advisor) emphasizes trust, estate, and wealth transfer management.
STEP (Society of Trust and Estate Practitioners) is an international designation for experts in inheritance, succession, and cross-border wealth planning.
Other key credentials include the CPA/PFS for tax-focused advisors and the ChFC for advanced financial planning.
Each represents rigorous training, ethics, and client-centered practice.
Seek referrals
Ask friends, family, or colleagues for recommendations. They may have valuable insights into an advisor’s reputation and performance.
Interview multiple advisors
Meet with several potential advisors to gauge their communication style, investment approach, and compatibility with your needs.
Evaluate fees and services
Compare the fee structures and services offered by different advisors to ensure you get the best value for your money.
Financial Planner vs. Advisor
The terms “financial planner” and “financial advisor” are often used interchangeably, but they can represent different roles in the financial industry:
- A financial planner focuses primarily on creating comprehensive financial plans, including budgeting, investments, insurance, and retirement planning.
- A financial advisor provides a broader range of services, which may include financial planning, investment management, and ongoing financial advice.
Some professionals may perform both roles, but it’s essential to understand their areas of expertise and the services they offer before hiring one.
How Much Does a Financial Advisor Cost?
The cost of hiring a financial advisor varies depending on the advisor’s fee structure and the services they provide.
Common fee structures include:
- Fee-only: Advisors charge a flat fee, hourly rate, or a percentage of assets under management. This structure can reduce conflicts of interest, as advisors do not earn commissions on investment products.
- Commission-based: Advisors receive a commission for recommending specific investment products. This can create a potential conflict of interest, as advisors may recommend products that generate higher commissions.
- Fee-based: A combination of fees and commissions. Advisors charge for their services and also receive commissions from investment products.
When evaluating costs, consider the value an advisor can provide in helping you achieve your financial goals, rather than solely focusing on fees.
Fee-only advisors often charge based on Assets Under Management (AUM), with typical fees ranging from 0.50% to 1.25% annually, depending on the size and complexity of the portfolio.
Some advisors also offer hourly rates, usually between $200 and $500+ per hour, or flat fees for comprehensive financial plans, often priced between $2,000 and $10,000 depending on the scope of the engagement.
Commission-based models, by contrast, involve advisors earning compensation from selling financial products such as insurance policies, mutual funds, or annuities.
This structure can create potential conflicts of interest, as it may incentivize advisors to recommend products that generate higher commissions rather than those that are objectively best suited to the client’s needs.
Products with complex or opaque fee structures are particularly vulnerable to this kind of bias.
Understanding the specific costs and potential incentives behind each compensation model is essential.
It helps clients make better-informed decisions about whom they hire, what they are paying for, and how to align their advisor’s incentives with their own financial goals.
Why You Don’t Need a Financial Advisor
While financial advisors can offer valuable guidance, they may not be necessary for everyone.
Here are some reasons you might not need a financial advisor:
Simplicity
If your financial situation is straightforward and your investment goals are simple, you may be able to manage your finances independently using online resources and tools.
Cost
Hiring a financial advisor can be expensive, particularly if you have limited assets. It may not be cost-effective for those with a smaller investment portfolio or limited funds to invest.
Self-education
If you’re willing to invest time in learning about personal finance and investment strategies, you may be able to manage your finances without professional assistance.
Robo-advisors
Robo-advisors are automated platforms that use algorithms to create and manage investment portfolios.
They typically charge lower fees than human advisors, making them a cost-effective alternative for those with simpler financial needs.
DIY approach
Some individuals enjoy managing their own finances and researching investment opportunities.
If you have the time and inclination to manage your financial affairs, you may not need an advisor.
Different Levels of Engagement
Financial advisory engagement is not one-size-fits-all.
It ranges from simple, transactional advice to fully integrated, dynamic wealth management ecosystems, depending on a client’s needs, complexity, and objectives.
Key dimensions include:
1. Scope of Planning
- Basic/Personal Accounts – Guidance on IRAs, 401(k)s, brokerage accounts, basic insurance. Here there’s minimal strategic integration.
- Comprehensive Financial Planning – Retirement models, tax strategy, estate considerations, insurance optimization, charitable planning.
- Deep Ecosystem Planning – Coordination across trusts, multi-generational wealth structures, cross-border assets, business succession, philanthropy.
2. Frequency of Engagement
- None/Passive – Available only if a critical issue arises (e.g., sudden liquidity event, investments gone wrong).
- One-Time Consultation – Specific, focused advice (e.g., lump-sum settlement vs. annuity payout, 401(k) rollover, stock option strategy).
- Periodic (Quarterly or Annually) – Ongoing review meetings, portfolio rebalancing, tax-loss harvesting, life event updates.
- Full-Service/Continuous – Proactive, dynamic monitoring of assets, cash flows, tax positioning, risk management, and opportunities. In some cases, similar to private banking or family office service levels.
3. Relationship Intensity
- Transactional – Advice tied to a single product or event.
- Strategic Partner – Ongoing trusted advisor role. Anticipates needs rather than reacts.
- Dedicated Private Office – Full team collaboration – attorneys, CPAs, bankers, portfolio managers – providing highly customized, holistic oversight.
Pitfalls to Avoid – How to Avoid Listening to the Wrong People
When it comes to things like when people need legal advice or have medical concerns, they are generally cognizant of who is trustworthy and who is not because those careers follow fairly standard tracks that are well-known to the public.
They know to use an actual attorney or physician rather than some unqualified person with opinions of highly unknown value.
Whereas in finance, where the credentials required to do the various types of professional roles are much more variegated, people generally don’t discern anywhere near as well, so people with no particular knowledge or ability can have undue influence if people aren’t careful.
When it comes to financial advice, understanding the difference between sound, helpful advice and misleading or specious information is incredibly important.
Misleading information can lead to poor financial decisions, potential losses, and regret.
Here are some nuances to help differentiate between someone genuinely helping you and someone who might be spreading wrong or specious information:
Credentials and Background
Financial advisors typically hold some type of financial certification or degree.
Common credentials include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or a degree in finance or economics.
Check to see if the person advising you has these credentials and validate them if possible.
Be cautious of anyone unwilling to share their credentials or who has no verifiable experience.
Personalized Advice
A credible financial advisor will take the time to understand your unique financial situation, needs, and goals before giving any advice.
They should ask questions about your income, expenses, debt, future plans, risk tolerance, etc.
If someone offers financial advice without understanding your situation, they’re likely not trustworthy.
Explanation and Transparency
Sound financial advice is usually given with detailed explanations and reasons.
Advisors should be able to explain why a particular financial strategy or product is suitable for you.
If someone cannot provide clear explanations or if they insist you don’t need to understand the details, it’s a red flag.
Be especially wary of those who talk in platitudes, are superficial, and share broad conclusions without explaining the reasoning behind them.
Regulation and Compliance
Regulation and compliance ensure financial advisors uphold integrity in their services.
Whether supervised by the state Board of Accountancy (for an accountant), for example, or state entities, these guidelines standardize practices, promoting trust and protection for clients while validating the expertise of the advisors.
Fiduciary Duty
Credible financial advisors have a fiduciary duty to their clients, meaning they are legally obligated to act in your best interest.
Those spreading bad information may not be held to this standard, and might prioritize their own interests over yours.
Sales Pressure
Legitimate advisors won’t pressure you into making immediate decisions or investing in specific financial products.
They understand that financial decisions need time and careful consideration.
Be wary of anyone pushing for a quick decision or employing high-pressure sales tactics.
Consistent with Known Principles
Sound financial advice should be consistent with well-known financial principles.
For example, diversification, long-term investing, and buying low-cost index funds are widely accepted practices.
Be suspicious of anyone promoting strategies that sound too good to be true or contradict these principles.
Risk Explanation
Every financial decision involves some level of risk.
A good advisor will explain these risks to you.
If someone guarantees certain returns or downplays the risk involved, they are likely misleading you.
For example, if someone ever says that a certain asset or asset class never goes down in value, there’s little to no risk, or something is supposedly a “slam dunk,” please be careful.
Fees and Compensation Structure
A credible advisor will be upfront about their fees and how they are compensated.
Misleading individuals may hide their fees or not be transparent about them.
Not Offering Unsolicited Advice
Legitimate financial advisors typically don’t offer unsolicited advice or contact you out of the blue.
Be cautious if you’re receiving unsolicited financial advice, particularly if it involves some form of immediate action.
Summary
These guidelines aren’t foolproof, but they can certainly help differentiate between someone who’s genuinely helping you manage your financial affairs and someone who’s potentially spreading misleading or specious information.
Also be wary of advice from family and friends. You might like them and they may offer advice for free, but if someone is not a qualified financial professional, their advice should not be taken seriously.
Be as discerning as possible.
FAQs – Should I Get a Financial Advisor?
Are financial advisors worth it?
Financial advisors can be worth it for individuals who need help managing complex financial situations or require assistance in achieving their financial goals.
However, the value of a financial advisor depends on your unique circumstances, financial knowledge, and personal preferences.
Consider the benefits and costs before deciding whether a financial advisor is worth it for you.
Do I really need a financial advisor, or can I just make my own decisions?
There are two things that are generally true.
- Individuals are free to make their own financial decisions.
- Sound financial management is rooted in expertise, discipline, and established principles (which require training and learning, and are most validly assessed by obtaining/maintaining the relevant credentials).
The real question is whether someone values applying that expertise to their decisions, and they deem that it’s resource-efficient for them to do so.
If they do, meaningful engagement is possible or at least worth exploring.
If they do not, it’s equally valid for them to proceed independently, without the expectation of professional validation.
Do I need a financial advisor to invest?
No, you do not need a financial advisor to invest.
Many individuals successfully invest using online brokerage platforms, robo-advisors, or by conducting their own research.
However, a financial advisor can provide personalized investment advice and strategies tailored to your specific needs and goals, which may be beneficial for some investors.
Do I need a financial advisor for my 401(k)?
You do not necessarily need a financial advisor to manage your 401(k).
Most 401(k) plans offer a range of investment options and tools to help you make informed decisions.
However, if you have a large 401(k) balance or need help with asset allocation, tax planning, or integrating your 401k into your overall financial plan, a financial advisor may be useful.
Do I need a financial advisor for my pension?
It depends on your specific pension plan and your personal financial situation.
If you need help understanding your pension benefits, deciding between a lump sum or annuity payments, or incorporating your pension into your broader retirement strategy, a financial advisor may be helpful.
However, if your pension plan is straightforward and you are comfortable managing your retirement income, you may not need a financial advisor.
Do I need a financial advisor after retirement?
The need for a financial advisor after retirement depends on your financial situation, goals, and comfort level managing your finances.
Some retirees benefit from professional guidance on managing their retirement income, tax planning, and estate planning.
However, if you have a simple financial situation and feel confident in managing your own retirement income, you may not need a financial advisor.
How much money do I need to hire a wealth manager?
Wealth managers typically cater to high-net-worth individuals and often have minimum asset requirements for their services.
The minimum amount varies among wealth managers, but it can range from $250,000 to $1 million or more in investable assets.
Private banking often starts at $10 million in investable assets, though it can start as low as $1-$5 million in certain jurisdictions.
If you do not meet the minimum asset requirement for a wealth manager, you may still be able to work with a financial advisor or planner who can provide valuable financial guidance based on your specific needs and goals.
Do financial advisors predict the stock market?
No. Predicting the stock market is not the role of a financial advisor, nor is it a realistic expectation.
The core responsibility of a financial advisor is not to forecast short-term market movements, but to build a resilient, customized strategy that helps you achieve your long-term financial goals regardless of what markets do in the short term.
Advisors focus on designing diversified portfolios, managing risk, optimizing tax outcomes, planning for retirement and legacy goals, and ensuring your financial decisions are aligned with your broader life objectives.
They operate on principles of probability, planning, and risk management, not on guesswork or “calling” market tops and bottoms.
In the same way a doctor focuses on maintaining your overall health rather than predicting the exact point something might go wrong, an advisor focuses on positioning your finances to be healthy, adaptive, and protected across a wide range of possible future scenarios.
A professional advisor brings value through process, discipline, and judgment – not by attempting to make precise market predictions.
Even the best investors in the world do not claim to do that reliably.
Anybody has basically a 50/50 chance of a “market call” being right by pure luck (and they can frame the correctness over whatever timeframe and magnitude they choose), but financial management is about building a repeatable process over time.
Should I listen to family and friends for financial advice?
It’s natural to want to trust family and friends, especially when they mean well.
Nonetheless, personal relationships do not guarantee financial expertise.
Unless they are trained, credentialed, and experienced in financial planning, investment management, or tax strategy, their advice may be based more on personal opinions, emotions, or anecdotal experiences than on sound, proven principles.
Financial advice needs to be tailored to your specific goals, risk tolerance, tax situation, and long-term plan – not based on what may have worked for someone else under very different circumstances.
Even well-intentioned guidance can lead to mistakes if it’s not grounded in a complete understanding of your financial picture and the broader complexities of markets, taxation, and risk.
Trusted financial advisors are trained to approach your situation objectively, methodically, and strategically. Family and friends may care deeply about you, but professional advice is about expertise.
In short: it’s always wise to listen politely, but decide carefully – and verify important financial decisions with a qualified professional who is obligated to act in your best interest.
What does a financial advisor do if a client has their own opinions that are clearly wrong or at odds with established facts and sound financial principles?
A skilled financial advisor approaches these situations with respect, patience, and professionalism.
Their role is not to argue, but to educate, clarify, and reframe.
Advisors present the relevant facts, explain the risks and consequences of different choices, and offer structured alternatives grounded in sound financial principles.
They work to create a clear, objective understanding so that the client can make an informed decision, even if it means challenging initial assumptions.
Ultimately, a good advisor recognizes that the client is free to make their own choices.
But the advisor also has a responsibility to document professional recommendations and, where necessary, set clear boundaries to avoid being associated with decisions that could be harmful or imprudent.
For example:
“As your advisor, it’s my responsibility to clearly document my professional recommendations and, when necessary, respectfully clarify where my advice differs, so you have a full understanding of the risks before proceeding.”
The best advisors aim to preserve trust while ensuring the integrity of the advice they deliver.
What questions should I ask a financial advisor before determining whether to work with them?
Here is a list of sample questions to ask a financial advisor before choosing to work with them:
- What are your qualifications and professional designations (e.g., CFP, CFA)?
- Are you a fiduciary at all times, and will you put my interests ahead of your own?
- How are you compensated? Fee-only, commission-based, or fee-based?
- Can you clearly explain your fee structure (percentage of assets, hourly rate, flat fee, etc.)?
- What services are included in your offering (investment management, tax planning, estate planning, insurance, etc.)?
- What is your investment philosophy, and how do you construct portfolios?
- How will you tailor your advice to my specific goals, risk tolerance, and situation?
- What experience do you have working with clients like me (e.g., entrepreneurs, retirees, high-net-worth individuals)?
- How do you manage conflicts of interest, and can you provide full disclosure?
How often will we communicate, and what does your ongoing service model look like (quarterly meetings, annual reviews, real-time access)?
- What happens if you retire or leave the firm? Is there a continuity plan?
- Can you provide references from current clients (if appropriate under compliance rules)?
- What technology and tools do you use for reporting, performance tracking, and financial planning?
- Do you work independently or are you affiliated with a larger firm, bank, or broker-dealer?
- How will you coordinate with my other advisors (CPA, attorney, insurance agents) if needed?
Do I Really Need A Financial Advisor? When To Hire A Financial Advisor
Conclusion – Should I Get a Financial Advisor?
A credentialed financial advisor is trained in a wide range of financial planning areas, equipping them with the knowledge and skills to help clients achieve their financial goals through comprehensive and personalized financial planning.
The decision to hire a financial advisor depends on your unique financial situation, goals, and personal preferences.
Weigh the benefits and costs, and consider your own abilities and resources before making a decision. Remember that you can always reassess your choice as your financial circumstances evolve.