Assess the pricing structure first. Financial advisors charge fees in different ways, and understanding the model matters before you hire someone.
Assets under management (AUM) fees work as a percentage of your portfolio. A 1% AUM fee on $100,000 under management costs $1,000 per year. This structure makes more sense for people with complex finances who need significant planning than for those who only want basic portfolio rebalancing.
Other advisors charge flat fees or hourly rates. That model often fits better if you need a one-time financial plan rather than ongoing portfolio management.
Some advisors earn commissions when you buy products they recommend, such as mutual funds or annuities. This can create a conflict of interest, since the advisor may push a product that benefits them financially rather than you.
Look beyond investment returns when evaluating an advisor's value. A good advisor helps you build a financial plan, work toward short and long-term goals, and stay calm during market swings. You should feel able to ask your advisor about Social Security timing, retirement dates, insurance needs, estate planning, and tax reduction strategies.
After each meeting, assess whether you feel more confident about your next steps or leave with more questions than answers. If it is the latter, consider finding a new advisor.
Before hiring an advisor, verify their credentials using the Financial Industry Regulatory Authority (FINRA) BrokerCheck or the Securities and Exchange Commission (SEC) Investment Adviser Public Disclosure database. Choose a fiduciary, who is legally required to act in your best interests.
Make sure the advisor has skills for your specific needs. If you own a small business, find someone who understands small business finances. Insist on transparency, responsiveness, and clear explanations of how fees work.