How to Choose a Financial Advisor: 8 Essential Steps

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Managing your finances can be overwhelming, especially if you lead a busy lifestyle or have ambitious financial goals. That’s where a financial advisor’s support can make all the difference.

A skilled financial advisor can manage your financial planning and may help you achieve your financial goals faster. They can also assist with tax, retirement, estate, and insurance strategies. Most importantly, they can free up your time and attention to focus on other matters.

Currently, there are over 330,000 financial advisors in the United States. With so many options, you may be wondering how to find a financial advisor that’s right for you. Below, we’ll explain how to choose a financial advisor in seven steps.

Step #1: Clarify Your Goals

Before you start your search, reflect on why you want to hire a financial advisor. Some possible reasons include gaining help with the following:

Financial planning – If you want to achieve specific short-term or long-term financial goals, such as saving up for a down payment or your child’s college tuition, a financial advisor can craft a custom budget and financial plan for you. They can also strategically structure your investments to expedite the process.
Investing – Did you know that $1,000 invested in the S&P 500 in 1954 would be worth one million dollars today? Investing your money into stocks, bonds, and other securities can be an effective way to grow your wealth. If you’re interested in investing, a financial advisor can help you construct a financial portfolio that aligns with your goals, timeline, and risk tolerance.
Tax planning – While your accountant can help you file your taxes appropriately, a financial planner can help you streamline your tax burdens using strategic income deferrals, charitable donations, and other tax-efficient strategies.
Insurance planning – Protecting your financial future involves more than just saving and investing; you also need to safeguard against unforeseen events. A financial advisor can assess your unique risks and suggest insurance plans to protect your income, assets, and loved ones.
Debt management – Amid rising inflation, many Americans are financing their lives with loans and credit cards. If you have a lot of debt to pay down, a financial advisor can help you design an efficient repayment plan and offer support along the way.
Retirement planning – A financial advisor can review your current retirement strategy to ensure you’re on track. They can also estimate how much money you’ll need to retire comfortably, craft a savings plan, and suggest the best investments to grow your wealth.
Estate planning – If you want to leave a legacy for your loved ones, an estate plan can ensure your assets are distributed according to your wishes and streamline your heirs’ tax burden.

Some financial advisors specialize in one of these areas, while others provide a full suite of services. Identifying which services you need ahead of time can help you narrow down your search accordingly.

Step #2: Understand the Different Types of Financial Advisors

Service offerings aren’t the only thing that sets financial advisors apart; credentialing does, too. The term “financial advisor” isn’t associated with any specific credentials. However, you can ensure your financial advisor has the proper level of education and experience by choosing one with the following titles:

Certified Financial Planner (CFP) – CFPs are financial advisors with a fiduciary duty to their clients, meaning they’re legally bound to act in their clients’ best interests. They must complete a rigorous certification process and keep up with continuing education. As a result, CFPs are uniquely qualified to offer personalized, ethical, and comprehensive financial advice. As of 2024, less than one-third of financial advisors possess this prestigious credential.
Registered Investment Advisors (RIAs) – RIAs are individuals or firms registered with the Securities and Exchange Commission (SEC) or state regulatory authorities to provide financial advice. Like CFPs, RIAs offer a high level of expertise and act as fiduciaries to their clients. However, RIAs often focus primarily on investment management instead of CFPs’ more comprehensive scope of services.
Chartered Financial Analyst (CFA) – CFAs undergo a rigorous education in investment management. As a result, these financial advisors often manage large investment portfolios and institutional investments. They also adhere to a strict code of professional ethics.
Certified Public Accountant (CPA) with Personal Financial Specialist (PFS) – CPAs are licensed accountants with expertise in tax preparation, financial reporting, and auditing. Some CPAs also possess a PFS credential, enabling them to offer comprehensive financial planning advice.

Along with these respected designations, some other credentialed financial planners include Chartered Financial Consultants (ChFCs), Certified Investment Management Analysts (CIMAs), and Chartered Life Underwriters (CLUs).

Understanding these credentials can help you choose a financial advisor with the education, experience, and fiduciary commitment to protect your best interests.

Step #3: Consider Using a Robo-Advisor

Credentialed human advisors offer the most comprehensive financial advice, but their services may not be suitable for everyone. If you prefer a lower-cost solution, a robo-advisor may be sufficient.

Robo-advisors are automated platforms that provide investment management services. They use algorithms to create and manage diversified portfolios, focusing primarily on exchange-traded funds (ETFs).

Most robo-advisors charge a flat fee or a percentage of assets managed of around 0.25%. For a $50,000 account balance, 0.25% would be $125 a year. Thanks to this affordability, robo-advisors are a suitable solution for individuals seeking a hands-off, low-cost approach to investing. While most robo-advisors can’t advise you on tax strategies or insurance, some offer access to human financial planners for an additional fee.

Robo-Advisors vs. Human Advisors

Here’s a quick comparison to help you decide if a robo-advisor or human advisor is right for your financial situation:

Cost – Robo-advisors are typically more affordable than human advisors since they automate the investment process. However, you get what you pay for— robo-advisors don’t provide the same service offerings or tailored support as a human advisor.
Personalization – Robo-advisors build and manage your portfolio based on your stated financial goals, risk tolerance, and time horizon. While they offer some degree of customization, they lack the detailed personalization of a human advisor.
Scope of specialization – Robo–advisors’ services are limited to management. On the other hand, human advisors can assist with retirement planning, estate planning, tax optimization, and insurance, making them a better fit for people with more complex financial needs.
Human touch – Pursuing your financial goals can be an emotional process. While robo-advisors may provide cost-effective investment management, they lack the emotional support and personalized guidance a human advisor can offer. This human touch can be particularly reassuring during volatile markets or significant changes in your personal life.

As you can see, robo-advisors may be right for people with more straightforward financial needs. However, human advisors are better suited to individuals with complex financial needs who want a more hands-on relationship with their financial planner.

Step #4: Create a List of Potential Financial Advisors

With your preferred services and advisor type, you can look for financial advisors in your area. Start your search by asking your friends, family, and colleagues for recommendations. Their referrals can offer valuable insights into different advisors’ expertise, communication styles, and client satisfaction.

From there, you can expand your search online. Websites like the National Association of Personal Financial Advisors (NAPFA), the Certified Financial Planner Board, and local financial planning associations often allow you to refine your search based on advisors’ credentials, specialties, location, and client reviews.

Combining personal referrals with thorough online research can create a targeted list of prospective financial advisors who are qualified to help you achieve your financial goals.

Step #5: Compile a List of Questions and Ask Them During Initial Consultations

Many financial advisors allow you to book a complimentary consultation to see if you’re the right fit. During these meetings, you can make the most of your time by asking the following questions:

What Financial Planning Services Do You Provide?

As we mentioned earlier, not all financial advisors offer the same suite of services. Thus, it’s important to ask prospective advisors about their offerings, whether that includes:

Financial planning
Retirement planning
Estate planning
Tax strategies
Debt management
Insurance planning
Budgeting and cash flow support
Education and charitable planning

Depending on your needs, some of these services may be more important than others. It’s also wise to consider what services you might need in the future and whether your advisor can support you as your goals evolve. This way, you can ensure your relationship can grow over time as opposed to requiring you to switch to a new advisor down the line.

What is Your Approach to Investing?

While specific services may vary, almost all financial advisors assist with investment management. However, their approaches can differ significantly.

Some advisors take a passive approach, while others are actively involved in each stock selection. Meanwhile, some advisors are open to integrating alternative investment strategies, such as private equity, real estate, or hedge funds, while others steer clear of these options.

Ideally, you want to find an advisor who takes an approach that aligns with your own investment philosophy, goals, and investment horizon. By understanding these details, you can gauge whether their methodology matches your preferences.

Are You Open to Integrating Cryptocurrencies?

Of all the alternative investments, cryptocurrencies remain one of the most controversial. Even so, many investors are eager to implement them into their portfolios, causing the crypto market cap to reach $2.7 trillion in March 2025.

If you want to feature this asset class in your portfolio, make sure your chosen financial advisor is open to integrating it and has experience navigating crypto’s volatility. Ask how the advisors conduct due diligence, monitor regulatory changes, and manage risk in this fast-evolving market to ensure your investments are strategically positioned.

What’s Your Background Working with Clients Like Me?

Advisors who specialize in working with clients who share a similar background may be a better fit for your needs. These advisors often have a proven track record of delivering results while navigating situations similar to yours. You should also inquire about their years of experience serving your niche.

What is Your Typical Communication Frequency?

Communication can make or break your satisfaction. Thus, you should see how often each contender updates their clients and select one that matches your expectations, whether you want to hear from them weekly, monthly, or quarterly.

You can also ask advisors if they provide timely market insights, informative newsletters, or other educational offerings to keep you informed throughout your investment relationship.

Do You Collaborate With Other Professionals?

If you have more complex financial needs, you can benefit from working with a financial advisor who consults with other professionals, such as certified public accountants (CPAs), attorneys, or experienced investment committees. A more robust support team can ensure you receive the very best advice and recommendations.

What Types of Tools Do You Use?

Just like most other industries, technology is rapidly changing how financial advisors do business. Some advisors are faster to adopt new tools than others.

As an investor, you should ask potential advisors about their use of artificial intelligence (AI) and other emerging technologies. Some of these tools can transform advisors’ efficiency, scenario modeling, and portfolio analysis, allowing them to spend more time personalizing your financial plans and proactively reaching out with timely progress reports.

If you’re comfortable with innovative technology, you may prefer working with an advisor who leverages AI solutions. However, if AI makes you feel uneasy or sparks data privacy concerns, you may prefer opting for an advisor that takes a more analog approach. In either case, it’s a smart move to discuss your financial advisor’s tech tools in advance.

What is Your Payment Structure?

How financial advisors charge for their services can influence the quality of their advice and overall cost. Understanding the different payment models can help you select an advisor whose compensation aligns with your financial goals.

Here’s an overview of the main types of financial planner payment structures:

Fee-Only

Fee-only financial advisors earn their income exclusively from their clients’ fees, as opposed to commissions on financial products. This payment model fosters a transparent and client-focused relationship.

Financial advisors can structure their fees in the following ways:

Percentage of the assets they manage for you (typically around 1%)
Flat annual fee
Hourly rate

Because fee-only advisors don’t earn commissions on financial products, they’re less likely to have conflicts of interest. Most fee-only advisors are also fiduciaries, so you can trust them to put your best interests first.

Commission-Based

Commission-based financial advisors often advertise their services as “free.” That’s because they earn their money through commissions on financial products, such as investments or insurance policies. Promoting these products may sometimes introduce conflicts of interest in your relationship.

Commission-based financial advisors are rarely fiduciaries. Instead, they’re held to a “suitability” standard. This means they can recommend products to their clients as long as they suit their general situation (even if other products may be better suited for their long-term goals).

Fee-Based

Fee-based financial advisors employ a hybrid payment structure. In addition to charging fees, they also earn commissions on financial products. While some fee-based advisors act as fiduciaries, they may not uphold this standard when selling commission-based products.

As you can see, selecting the right payment structure is crucial, as it can influence the quality of advice and the potential for conflicts of interest in your relationship. If you want the most objective advice available, opt for a financial advisor who employs a fee-only or fee-based model.

Step #6: Carefully Vet Each Financial Advisor’s Background

After meeting with a few different financial advisors, you’ll likely have a short list of your top picks. Before finalizing your selection, verify their credentials and background by:

Reviewing their Form ADV – A Form ADV is a financial advisor’s mandatory filing with the SEC and state regulators. It outlines their employment history, services, fees, and potential conflicts of interest. It also features information about their investment philosophy.
Investigating their disciplinary history – Next, you can dig into your financial advisors’ disciplinary history on the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck website. It will showcase a clean record or a list of regulatory actions, complaints, and sanctions.

Taking this extra step ensures you select a qualified professional who maintains high ethical standards and can provide peace of mind as you embark on your financial journey.

Step #7: Hire the Financial Advisor

After determining your favorite financial advisor, the next step is to engage their services. This process varies slightly from one advisor to the next, but it generally involves the following steps:

Express your interest in becoming a client.
Review the advisor’s engagement letter.
Sign their Form ADV and Form CRS (Customer Relationship Summary).
Discuss your goals, risk management, and investment timeline.
Provide your financial information.
Establish clear communication preferences.
Set up your accounts and transfer them to their management.

Alden Investment Group: Choose the Right Financial Advisor With Confidence

Selecting the right financial advisor involves careful consideration. You need to evaluate your advisor’s credentials, investment philosophy, tech infrastructure, fees, fiduciary duty, and communication style. By taking the time to vet potential advisors thoroughly, you can make your final choice with confidence.

Are you ready to start your financial advisor search? Reach out to Alden Investment Group. As a trusted RIA and broker-dealer, we can connect you with experienced advisors who provide comprehensive financial planning services, whether you want to leverage alternative investments, plan for retirement, or set up your succession plan.

Take the first step toward securing your financial future by contacting us today!

Sources:

Finance Strategist. How Many Financial Advisors Are in the U.S.?
https://www.financestrategists.com/financial-advisor/advisor-types/how-many-financial-advisors-are-in-the-us/

The Motley Fool. 9 Investing Stats That Will Blow You Away.
https://www.fool.com/retirement/general/2016/01/28/9-investing-stats-that-will-blow-you-away.aspx

Gallup. Americans Continue to Name Inflation as Top Financial Problem.
https://news.gallup.com/poll/644690/americans-continue-name-inflation-top-financial-problem.aspx

CFP Board. Certified Financial Planner Population Grows; U.S. Advisors Expand.
https://www.cfp.net/news/2024/02/certified-financial-planner-population-grows-us-advisors-expand#:~:text=The%20United%20States%20has%20the,of%2098%2C875%20CFP%C2%AE%20professionals.

Investopedia. Crypto Due Diligence and the Fiduciary Responsibility for Financial Advisors.
https://www.investopedia.com/financial-responsibility-and-crypto-due-diligence-8385090