Choosing the Right Financial Advisor: Understanding Different Types & Factors to Consider
By Are you in the market for a financial advisor? With so many different types of advisors – from Certified Financial Planners (CFPs) to Chartered Financial Analysts (CFAs) – it can be hard to know where to start. To ensure you make the best decision for your needs, here's an overview of the different types of financial advisor and factors to consider when choosing one.
Specialization in areas such as investment advice or estate planning may be an option for financial advisor. They can also focus their assistance on a particular kind of customer, such as young professionals, families, immigrants, retirees, or a combination of different categories.[0] Different positions in the financial sector are referred to as “financial advisor”. But recent regulations from the U.S. Securities and Exchange Commission (SEC), called Regulation Best Interest (Reg BI), have limited who can use the title.[1] In many cases, Financial Advisors are also known as Registered Investment Advisors (RIAs) or Investment Advisor Representatives.[1]
When selecting a financial advisor, several key considerations should be taken into account.[2] Search for an advisor who has the knowledge, credentials, and a history of aiding customers in attaining their financial objectives.[2] Be sure to familiarize yourself with their pricing and make sure it fits with your requirements.[2] Follow your intuition when selecting an advisor and ensure that you are comfortable with them and that they will be looking out for your best interests.[2]
Certified Financial Planners (CFPs) are financial professionals who help with things like debt management, creating budgets and planning for retirement. In order to obtain the CFP designation, individuals must pass intensive certification exams.[1] Chartered Financial Analysts (CFAs) specialize in investments and asset management. Certified Financial Consultants (ChFCs) can provide financial planning advice that is tailored to the specific needs of a client.
A 2021 study from Advisory HQ found that the typical hourly rate for a financial advisor is between $120 and $300 per hour.[3] According to Advisory HQ, a flat fee for investment advice usually ranges from $7,500 for portfolios with a value of less than $499,999 to $55,000 for those worth more than $7.5 million.[3] It is recommended to look for a fee-only advisor, as many advisors have been transitioning to the fee-based and fee-only models, in order to avoid any potential conflicts of interest.[3]
Ultimately, the decision of which financial advisor is right for you will depend on your individual needs and goals.
0. “myFICO: How to Find and Vet a Financial Advisor” Yahoo! Voices, 22 Feb. 2023, https://www.yahoo.com/now/myfico-vet-financial-advisor-173400048.html
1. “Ask an Advisor: Can a Single Financial Advising Firm Address ‘My Complete Spectrum of Financial Concerns?'” Yahoo Finance, 22 Feb. 2023, https://finance.yahoo.com/news/ask-advisor-single-financial-advising-201753980.html
2. “How to Choose a Financial Advisor” Beverly Hills Courier, 17 Feb. 2023, https://beverlyhillscourier.com/2023/02/17/how-to-choose-a-financial-advisor/
3. “How Do Financial Advisors Make Money? Cost and Fees, Explained” Market Realist, 14 Feb. 2023, https://marketrealist.com/personal-finance/how-do-financial-advisors-make-money/
