Financial Advisor: How to Choose the Right One for You

What is a financial advisor?

A financial advisor is a professional who provides compensated guidance on money matters such as investments, tax planning, retirement, estate planning, insurance, and overall financial strategy. Advisors may offer one or many services and increasingly act as a “one-stop shop” for clients’ financial needs.

Core services

• Investment management and portfolio construction
• Retirement planning and income strategies
• Tax planning and optimization
• Estate planning coordination
• Insurance and risk management
• Ongoing financial planning and periodic reviews

Types of advisors and key distinctions

“Financial advisor” is a broad, non‑regulated title that can include stockbrokers, insurance agents, tax preparers, investment managers, financial planners, estate planners, and bankers. Important differences include:

• Execution brokers vs. advisors: Brokers may only execute trades or sell products; true advisors provide ongoing guidance and planning.
• Product salesperson vs. fiduciary advisor: Some professionals primarily sell company products and earn commissions. Fiduciaries are required to act in a client’s best interest.
• Registered Investment Advisors (RIAs): Governed by the Investment Advisers Act of 1940 and held to a fiduciary standard (duty of loyalty, care, and full disclosure). Not all advisors are RIAs.

There were about 330,300 financial advisors in the U.S. as of 2021.

Credentials and licenses

Relevant credentials and exams include:
* Series 7, Series 6, Series 63, Series 65 (depending on services and products sold)
Certified Financial Planner (CFP®) — common for planners focused on holistic financial planning
RIA registration — signals a fiduciary relationship when available

Employers often sponsor license exams; many advisors start through internships or entry-level positions.

How advisors charge

Fee structures vary:
* Assets under management (AUM): commonly around 1% annually, often on a sliding scale
Flat annual or retainer fees: commonly several thousand dollars for ongoing service
Fee for plan creation: often $1,000–$3,000 for a tailored plan
Commissions: typical for product sales; rates vary (examples cited in industry literature: 3%–6% on certain accounts)
Combination models: some firms mix fees and commissions

Always ask for a clear explanation of fees and any conflicts of interest.

How to become a financial advisor (brief)

Typical path:
1. Earn a bachelor’s degree (finance, economics, or similar helpful but not required).
2. Gain experience through internships or entry‑level roles at financial firms.
3. Obtain required licenses (Series exams) and, if desired, professional designations (e.g., CFP).
4. Continue education and build client relationships.

How to choose the right advisor

1. Identify your needs (investing only, retirement planning, comprehensive financial plan).
2. Confirm fiduciary status: prefer RIAs or advisors who formally agree to a fiduciary duty.
3. Check credentials and licenses (CFP, RIA registration, appropriate series).
4. Understand compensation clearly and identify potential conflicts of interest.
5. Ask about experience with clients like you, typical asset levels managed, and services included.
6. Request references and review disciplinary history (regulatory databases).
7. Evaluate communication style and responsiveness—advice should be clear and timely.
8. Get fee structure in writing before signing anything.

What to expect from a good advisor

• A comprehensive assessment of your financial situation and goals
• A written, tailored plan with actionable steps and ongoing reviews
• Clear disclosure of fees, conflicts, and how recommendations are chosen
• Periodic monitoring and adjustments as your situation changes

Compensation for advisors

Pay varies by experience, location, client base, and business model. The median pay for financial advisors in 2021 was about $94,170 per year.

Bottom line

A competent financial advisor helps you set and pursue financial goals, reduce tax inefficiencies, manage investments, and plan for retirement and estate matters. Choose an advisor whose services match your needs, who is transparent about fees and conflicts, and—when possible—who will act as a fiduciary on your behalf.