Money can be complex and intimidating, no matter how much or how little you have. If you’ve considered seeking professional financial help but don’t know where to start, first identify exactly what it is you want to accomplish.

Do you want to start investing or invest more money? Do you want to know how much you need to save to retire at 65? Do you need advice for paying off debt? Are you wondering how much life insurance you need?

The truth is that some financial decisions call for reinforcement; others, you can probably handle on your own — at least for now. Or, you might need to hire the services of a financial advisor.

• Do I need a financial advisor?
• At what point do I need a Financial Advisor?
• When you Should and Should not Hire a Financial Advisor
• What is the difference between a Financial Planner and Financial Advisor
• What Questions Should I ask my Financial Advisor?
• Can you Trust Financial Advisors?

Do I need a financial advisor?

A financial adviser is a catch-all term that usually includes financial planners and investment advisers. It’s imperative to look for financial advisers who follow the fiduciary rule, meaning they operate in their clients’ best interest, and are fee-only. This means client fees are their only compensation and they don’t earn a commission when you invest in certain funds or buy financial products.

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A good certified financial planner can help organize your overall financial picture, including setting up a retirement saving and investing strategy; planning for big expenses, like buying a house or having kids; everyday budgeting and spending; plus tax and estate planning.

You may also consider hiring a financial planner if you’re too overwhelmed or confused by your money to make big financial decisions, including how to balance multiple financial goals, manage a business, get out of crushing debt, or establish a retirement savings plan. If the alternative to meeting with a financial planner is decision paralysis, you’re better off seeking outside advice.

Investment advisers typically focus on the nuances of your investment strategy, such as what stocks or funds to buy in and out of your retirement accounts and how to minimize taxes. They can also manage your investments, but usually charge a fee of 0.5% to 2% of the portfolio.

You don’t have to be a sophisticated investor with millions in the market to have an investment adviser, but you probably don’t need one if you just want to know how to invest a few thousand dollars or which funds to choose in your retirement accounts.

A robo-adviser is often a cheaper alternative, and some even provide access to human investment advisers or financial planners for an extra fee.

Automated investing services (sometimes called robo-advisers) like Wealthfront and Betterment set up and automatically rebalance an investment portfolio for you based on your goals and risk tolerance, and the annual management fee is just 0.25% of your account balance.

Robo-advisers can be a valuable tool for the average person with a long-term outlook who truly wants to “set and forget” their investments.

For a mutual fund, which is one of the growing financial vehicles where most of the people have started parking their investments, the information is available all over the internet. There are various graphs shown, return shown over various time periods indicating both past performances as well as how the fund can perform in the future incorporating market volatilities.

This information is just a click away, one just has to know what type of mutual fund investment he/she has to go with and the plethora of options gets listed for comparison purpose. Even knowing the type of mutual fund suitable is not difficult, there are various information sites, tutorials and asset management companies available on the internet for beginners to get a good head start with abundant information.

At what point do I need a Financial Advisor?

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.

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.

When you Should and Should not Hire a Financial Advisor

You’re free to hire a financial planner at any point in time. But there are some instances where it might be more important to enlist the help of a financial planning expert.

1. You’re at, or close to, retirement age

Some of your biggest money questions may arise when you’re close to retirement. Do I have enough money? What are my options? How can I save more? Financial planners are trained to help individuals plan for and navigate the unique challenges of retirement.

2. You got a significant raise

When you’ve got more money coming in all of a sudden, it may be time to put together a plan. While you can use that money to raise your short-term quality of life, you could look into using it to increase your wealth and future financial position.

Financial planners can help you decide where to invest, what options you have and what might be the best way to increase your overall wealth.

3. You received an inheritance

One of the most important times to seek the help of a financial professional is when you receive an inheritance. You’ll most likely have questions about where to invest, how to take care of your passed family member’s final financial wishes and how the newfound money changes your life moving forward. Financial planners can answer all of these questions.

4. You’re going through a divorce

While divorces can take a major toll on your emotional health, they can also take a major toll on your financial help because of shared finances. Who gets what? How do I protect myself? Where should I reallocate my assets? All of these questions and concerns can be put to rest with the helpful advice of a financial professional.

5. You’ve had a major life event happen

Any other major life event that happens might require the help of a financial planner. If you change jobs, downsize dramatically, find a new source of income, have a baby, sell a business or anything else, you should have a plan. A financial planner can walk you through all of your options and help you to make the most well-informed decision.

6. You’re ready to take control of your financial situation

You don’t have to have a major life event happen to get the desire to take control of your current and future financial situation. If you’re ready to make a new plan, reach out to a financial planner. Additionally, if you have an existing plan that you want to stress-test, a good financial planner can help you identify and plug any leaks for optimal performance.

You don’t need a financial advisor if:

1. You live paycheck to paycheck

While you still need a financial plan, you probably don’t need the help of a financial planner. Instead, you should look into simple practices like budgeting, saving and cost-cutting to slowly get ahead. Once you’ve made up some ground with the basics, you can look into getting the help to take the next step.

2. You’re deep in debt

Financial planners mainly focus on helping people grow wealth. Additionally, financial planners are not free, which is not ideal for someone in debt. What you need instead is a credit counselor or financial professional who specializes in getting people out of debt. Once you’re out of debt, you can start focusing on growing for the future.

3. You know what you’re doing

Financial planners are designed for people that need help making financial decisions. If you’re already an expert in the field, you might not want to pay for the help of a professional with the same knowledge base. The only exceptions to this might be if you’re short on time, want a second set of eyes or you want to stress-test your existing plan.

What is the difference between a Financial Planner and Financial Advisor

While many people use the terms financial planner and financial advisor interchangeably, there are actually differences between the two. The term financial advisor is a broad, overarching term that encompasses anyone who helps to manage matters of money.

This might be investments, real estate, major purchases, life insurance or even tax planning. Financial advisors are required to hold a special license to work with the public (Series 65).

Financial planners are people who help individuals and businesses plan for their financial future. Unlike financial advisors, financial planners are not required by law to hold any special certifications.

That being said, many of them do hold licenses, special certifications and have attended special schooling to better serve their clients. Additionally, with certain areas of advising, there are some legal requirements they must uphold.

At times, both financial advisors and financial planners may do the same type of work.

What Questions Should I ask my Financial Advisor?

Before you commit to a financial advisor, you want to make sure you’re hiring the best person for you and your situation. Start by asking yourself a key question, then check out the 10 questions you should ask an advisor before hiring one.

1 question to ask yourself

What type of help are you looking for?

I just need to get started investing for my financial goals: A robo-advisor may be the best fit if you’re just starting out or only need investment management. For a low fee, these computer-based services choose and manage an investment portfolio for you.

Some also offer access to financial advisors if you have questions about your investments or your goals. Robo-advisors often have low or no account minimums, so it’s easy to get started.

I want personalized financial advice, but don’t need to meet my advisor in person. There are a crop of services offering online financial planning for less than you’d pay a traditional in-personal financial advisor or financial consultant.

These companies provide complete investment management and holistic financial planning; the major difference is that you’ll meet your advisor virtually — by phone or video chat — rather than in a local office. Most services pair you with a dedicated advisor or certified financial planner; some less-expensive options offer access to a team of advisors.

I want a local advisor or a wider array of financial advice: On the other hand, if you want in-person financial planning or have a more complex situation, you may decide a traditional local financial advisor is right for you.

10 questions to ask financial advisors

If you think exploring a relationship with a traditional financial advisor is the right move, be sure to ask these 10 questions during the interview process.

1. Are you a fiduciary?

A fiduciary works in the best interest of the client. Nonfiduciaries need only to recommend products that are “suitable” — even if they’re not the lowest-cost or most ideal for you.

2. How do you get paid?

Advisors can use a variety of fee structures. To keep it simple and avoid conflicts of interest, focus on fee-only advisors. They don’t get commissions for selling products.

“Make sure it’s fee-only — those particular words,” says Alice Finn, founder of PowerHouse Assets and author of “Smart Women Love Money,” a guide to investing.

Fee-only advisors might charge a percentage of the assets they manage for you (1% is common), a flat fee for services or an hourly fee. If cost is a concern, you may want to go with a low-fee robo-advisor or an online planning service like those mentioned above.

3. What are my all-in costs?

In addition to paying the advisor, you’ll face other fees — and you’ll want to know what they are. Fees can decimate your savings over time. A NerdWallet analysis found that a 1% mutual-fund fee could cost millennials $590,000 in retirement savings. “You can lose half your net worth without even knowing it,” Finn says. “You want to be vigilant.”

4. What are your qualifications?

Financial professionals can have a confusing list of initials behind their names. And whether a finance professional goes by “investment advisor” or has the CFP designation, it’s your job to vet them.

The Financial Industry Regulatory Authority’s professional designations database will tell you what they mean; if there are any education requirements; if anyone accredits the designation; whether there’s a published list of disciplinary actions; and if you can check professional status.

5. How will our relationship work?

Put another way: How much access will you have to the advisor? You want to know how often you’ll meet and whether she’s available for phone calls or emails outside of scheduled appointments.

6. What’s your investment philosophy?

It’s important to ensure you have the same investment philosophy. Here’s why: “You have to believe in what they’re doing to stick with it,” Finn says. “When financial advisors really do their job is when the market is down and they can convince you to stick to the same page,” she says, so you don’t sell at the bottom of a market cycle.

It’s also important to make sure you and your advisor align on investment style. For example, if socially responsible investing is important to you, you may want to ask whether or not your advisor will be able to help you create a portfolio that aligns with your values.

Also ask: Who are your typical clients? Find an advisor who is used to a situation like yours and able to help you meet your goals.

7. What asset allocation will you use?

You’ve heard how important it is to be diversified, right? Your asset allocation is how you create a diversified portfolio. “It drives most of your returns,” Finn says.

“You don’t want someone who is just going to pick U.S. large-company stocks,” Finn says. Your portfolio should include domestic and international stocks, and small-, mid- and large-cap companies.

8. What investment benchmarks do you use?

Advisors should use benchmarks that directly relate to what they’re invested in, or be able to explain why they don’t.

Some managers will use a “straw-man benchmark,” Finn says. For example, the advisor says: “My goal is to beat the Standard & Poor’s 500.” But if that advisor is investing in a diversified portfolio beyond simply large-cap U.S. companies, that benchmark is a mismatch. “Over time they should beat the S&P 500 because they’re taking on more risk,” Finn says.

9. Who is your custodian?

Ideally, your financial advisor has hired an independent custodian, such as a brokerage, to hold your investments, rather than act as his or her own custodian — à la Bernie Madoff, the notorious financial advisor who defrauded clients through a multibillion-dollar Ponzi scheme.

That provides an important safety check. “If I send my clients performance information … and it tells them how much I say is in their account, they can go online any minute and double-check,” Finn says.

10. What tax hit do I face if I invest with you?

This helps ensure the advisor has your tax bill in mind when making financial decisions. And asking about taxes and fees is a way to explore what your estimated net return might be. “What you want to know is: What do you get to keep after fees and after taxes?” Finn says.

Can you Trust Financial Advisors?

An unscrupulous financial advisor can cause an unsuspecting investor to be badly hurt or even tragically wiped out of a lifetime of hard work and savings.

Today, the question of a financial advisor’s trustworthiness has taken on a heightened importance. The memory of how New York investment advisor Bernard Madoff fleeced so many sophisticated and highly accomplished people still burns bright.

Plus, there are so many ways today for investors to make – and lose – money. Wall Street seems to invent new financial products on an almost daily basis, each more alluring (and yet potentially confusing) than the next.

That’s why the public needs people to counsel them. But these investments also carry heavy risks. Individual investors naturally rely on the expertise and involvement of financial advisors.

Further complicating the picture, not every investor has the same needs at the same time. A young person might eschew the highly conservative notion of capital preservation because he or she will be working and earning money for decades to come.

This individual might be much more willing to go into speculative financial instruments than, say, someone nearing retirement age who has doggedly amassed a healthy nest egg and primarily wants to preserve it without unnecessary aggravation or risk.

To raise your personal comfort level with an investment advisor, experts suggest checking an advisor’s background with the Financial Industry Regulatory Authority’s (FINRA) website. If an advisor has a history of non-compliance with regulations such as The Employee Retirement Income Security Act (ERISA), it would be hard to trust that the advisor will make your finances his or her priority.  

Savvy investors ask an advisor questions on these five essential subjects:

1. Core Values
Find out what your advisor’s core values are. A person of integrity should be capable of reciting his or her values to you. If an advisor keeps trying to sell you a financial service that generates a commission regardless of how well it suits you, this person’s values are probably not aligned with yours. 

An advisor who believes in having a long-term relationship with you – and not merely a series of commission-generating transactions – can be considered trustworthy.

2. Payment Plan
Make sure you understand how the advisor is being compensated for investment advice or transactions, so you aren’t automatically forfeiting a chunk of your nest egg to someone who doesn’t have your best interests at heart. “Be crystal clear on how much money you are paying for their services,” said Joe De Sena, a private wealth advisor with J. De Sena & Associates on Long Island. “Is there an annual fee?

Are you paying by check each time for their services? Or will the fee be automatically deducted by the advisor from your assets? Are you paying that person based on the level of their performance? Plus, the clients should receive, for tax purposes, an accounting of exactly how much they paid the advisor.

3. Level of Expertise
Dan Masiello, a financial advisor in Staten Island, N.Y., stresses the importance of an advisor’s expertise, training and education. “For your own comfort level as a customer, you will want to look at someone’s education, certifications in the business and number of advanced degrees,” he said.

It is also important to make sure your prospective advisor has not had scrapes with regulatory authorities or negative references in the business media or experienced a history of investigations for misconduct. “A referral gives the client a certain degree of comfort in allowing you to speak with their clients,” Masiello said. “The key word here is transparency, which contributes to being able to trust someone.

You’d prefer to see a level of stability. Has your advisor been committed to the same organization for some time and been in the profession for a long time?” Notable financial certifications to look for include Certified Financial Planner® (CFP), Certified Fund Specialist (CFS) and Chartered Investment Councilor. 

4. Service
Do you hear from them on a regular basis?” said Derek Finley, a financial advisor with WJ Interests in Sugar Land, Texas, which manages 165 clients and $190 million. A straightforward, excellent question! This point can be as much of a deal-breaker, ultimately, as anything sordid or even criminal.

How annoying and frustrating is it for an investor not to be kept apprised of a news development that could affect his or her portfolio, such as a price change in a stock, a shake-up at a prominent company or an acquisition in an industry that has a bearing on stocks in the customer’s portfolio?

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The advisor could cost the client money by not keeping him or her apprised of major occurrences. Of course, that doesn’t mean that all phone calls from your broker are a positive sign. Be leery of brokers who badger you with calls that are only made to sell you products and increase commissions. 

5. Patience
Will your advisor take the requisite time to explain, methodically and patiently, his or her recommendations? Notes Trent Porter of Priority Financial Planning in Denver, which manages 27 clients: “One of the biggest red flags is if you don’t understand your investments, especially if your advisor isn’t able or willing to explain them when asked. Investors need to be very leery of advisors who take custody of their assets, a la Madoff.” 

You can take measures to help yourself beyond these important points, too.

“Having a third-party custodian directly holding and reporting on your assets helps to guard against fraud,” Porter said. “Also, be aware of whether or not they are a fiduciary, which legally requires them to put your interest in front of their own. Shockingly, not all advisors are required to do so.

Just because they are a fiduciary doesn’t mean you won’t get ripped off. But it’s a good start.” To get a third-party custodian, contact a provider of custodian services, such as Charles Schwab, TDAmeritrade or Fidelity.

Conclusion

Chances are if you know you need to make some major financial decisions, but you don’t know what to do, you need a financial advisor. When you need help with your health, you go to the doctor. When you need help with your financial health, why not see a professional as well? While each situation is unique, getting financial advice earlier in the decision-making process is almost always better.