How to Choose a Financial Advisor

Making financial decisions can feel overwhelming, especially when you’re balancing retirement goals, investments, taxes, insurance, estate planning and other priorities.

A financial advisor can help you organize those decisions into a plan based on your goals and circumstances. The right advisor may also provide guidance and objectivity when markets are uncertain or emotions make it difficult to stay focused on a long-term strategy.

Before choosing an advisor, it’s important to understand what support you need, how the advisor is paid, and whether their experience and approach are a good fit for you.

What Can a Financial Advisor Help With?

The services offered by financial advisors vary. Depending on their experience and qualifications, an advisor may help with:

• Financial planning
• Retirement planning
• Investment management
• Tax-aware investment strategies
• Insurance needs
• Estate-planning considerations
• Education savings
• Charitable giving
• Planning for major life changes

An advisor may also act as a sounding board when you’re facing a major decision. During periods of market volatility, for example, an advisor can help you review your goals, risk tolerance and financial plan before making changes based on short-term emotions.

When Might You Consider Working With an Advisor?

People may seek financial guidance at many different stages of life.

You may benefit from professional guidance when:

• Starting a career or building a budget
• Paying down debt
• Saving for a home
• Starting or growing a family
• Managing investments
• Changing jobs or handling a retirement-plan rollover
• Preparing for retirement
• Receiving an inheritance
• Planning an estate
• Managing a major change in income or financial responsibilities

You don’t need to wait until you have a certain amount of money. The more important question is whether professional guidance could help you make informed decisions and stay focused on your goals.

How Does the Financial Advisor Get Paid?

When you work with an advisor, you’re trusting that person with personal and important financial information. You should understand how the advisor and their firm are compensated and whether that compensation could create a conflict of interest.

Common compensation arrangements include:

Fee-only financial advisors

Fee-only advisors are paid directly by their clients and generally do not receive commissions for selling financial products.

The fee may be:

• A percentage of the assets they manage
• A flat fee
• An hourly fee
• A subscription or ongoing planning fee

Ask which services are included and whether you’ll pay separate fees for investment management, financial planning or other services.

Commission-based financial advisors

Commission-based advisors may earn money when clients purchase certain financial products, such as securities, insurance policies or annuities.

Ask the advisor to explain any commissions they may receive and whether other products or options are available.

Fee-based or hybrid arrangements

Some advisors use a combination of fees and commissions. An advisor might charge a planning or asset-management fee while also earning commissions from certain products.

Don’t assume an advisor is fee-only because they charge a fee. Ask them to clearly explain every way they and their firm may be compensated.

What Are the Advisor’s Credentials and Experience?

Credentials can help you understand an advisor’s education and professional background, but credentials alone don’t guarantee that the advisor is right for you.

Two common financial-planning credentials include:

Certified Financial Planner professional

CFP professionals must meet education, examination, experience and ethics requirements established by the CFP Board. They must also complete ongoing continuing education.

Chartered Financial Consultant

ChFC professionals complete coursework covering financial planning topics and must meet professional experience and continuing-education requirements.

There are many other credentials in the financial-services industry. Ask what each designation means and how it relates to the services you need.

You should also review the advisor’s professional history. Depending on the advisor’s registration, you may be able to find information through the SEC’s Investment Adviser Public Disclosure website or FINRA’s BrokerCheck.

These resources may show:

• Registration history
• Employment history
• Professional qualifications
• Disciplinary events
• Customer disputes or disclosures

Does the Advisor Understand You and Your Needs?

An advisor may have strong credentials and experience but still be the wrong fit for you.

Consider whether the advisor:

• Listens before recommending products or strategies
• Explains information in a way you understand
• Has experience with clients whose needs are similar to yours
• Understands your values and priorities
• Clearly explains risks, fees and potential conflicts
• Makes you feel comfortable asking questions

Be cautious if an advisor begins recommending products before learning about your financial situation, goals and concerns.

A strong advisor relationship should feel collaborative. You should understand the recommendations being made and why they may be appropriate for you.

Questions to Ask a Financial Advisor

Before making a decision, consider asking:

• What services do you provide?
• What types of clients do you typically work with?
• How are you and your firm compensated?
• What fees and expenses should I expect?
• Do you receive commissions or other payments from third parties?
• What credentials and licenses do you hold?
• Are you required to act as a fiduciary when advising me?
• How will we communicate, and how often will we meet?
• Who will manage my account and answer my questions?
• How will you build recommendations around my goals and risk tolerance?
• Have you had any disciplinary or regulatory issues?

Ask for written information about services, fees and potential conflicts before agreeing to work together.

Finding the Right Financial Advisor

Choosing an advisor starts with understanding the type of support you need. From there, compare services, qualifications, compensation, experience and communication styles.

Consider speaking with more than one advisor before deciding. An initial conversation can help you determine whether the advisor listens carefully, explains their approach clearly and understands your priorities.

The right advisor should help you make informed decisions while keeping your financial plan connected to your goals.

Connect with OneDigital’s Wealth Management team to learn more.

Investment advice offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and wholly-owned subsidiary of OneDigital. These materials are provided for informational and educational purposes only and do not constitute a recommendation to buy, sell, or hold any security, nor do they constitute legal, accounting, investment, or tax advice. The materials and the information provided are not designed or intended to be applicable to any person’s individual circumstances. These statements do not constitute an offer or solicitation in any jurisdiction. All included information and data are limited only to the inputs and other financial assumptions indicated.