How to Find a Financial Advisor and Achieve Your Goals

Managing your finances can be a daunting task, especially when it comes to making important decisions about investments, retirement planning, and achieving your long-term financial goals. This is where a financial advisor can provide valuable guidance and support.

In this comprehensive guide on how to find a good financial advisor, we'll walk you through the process of finding the right financial advisor for your needs, understanding the different types of advisors and their certifications, and leveraging powerful tools like Kubera to streamline your collaboration and achieve your financial objectives.

What is a Financial Advisor?

A financial advisor is a professional who provides guidance and assistance in managing your personal finances. Whether you're an individual or a business, a financial advisor can help you make informed decisions about your money, investments, and financial goals. They play a crucial role in helping you navigate complex financial matters, such as investment management, retirement planning, tax strategies, and estate planning.

Financial advisors come in various forms, including human advisors and digital platforms known as robo-advisors. Human advisors offer personalized, face-to-face interactions and can provide tailored advice based on your unique financial situation. On the other hand, robo-advisors use algorithms and technology to automate investment decisions and portfolio management, often at a lower cost than traditional financial advisors.

Financial Advisor vs. Robo Advisor vs. Accountant

When it comes to managing your finances, you have several options to choose from, including financial advisors, robo-advisors, and accountants. Each professional serves a different purpose and can help you achieve your financial goals in various ways.

Robo-Advisors

If you're looking for fundamental financial services, such as investment help or the development of a basic financial plan, a robo-advisor might be a suitable choice. Robo-advisors like Betterment or Wealthfront use algorithms to create and manage investment portfolios based on your goals, risk tolerance, and time horizon. They typically charge lower fees compared to human advisors, making them an attractive option for those just starting to invest or with simpler financial needs.

Accountants

For tasks such as bookkeeping, tax preparation, and tax planning, an accountant is likely the most suitable professional to consult. Certified Public Accountants (CPAs) have extensive knowledge of tax laws and can help you minimize your tax liability, ensure compliance with regulations, and provide advice on tax-efficient investment strategies for your personal or business finances.

Financial Advisors

If you require more advanced financial advice, such as comprehensive financial planning, estate planning, or retirement income strategies, working with a human financial advisor becomes essential. Financial advisors offer a wide range of services and can provide personalized guidance tailored to your specific needs and goals. They can help you create a holistic financial plan, manage your investment portfolio, and adapt your strategy as your life circumstances change.

Why Engage a Financial Advisor?

Engaging a financial advisor can provide numerous benefits and help you achieve your financial goals more effectively. In 2022, approximately 35% of Americans worked with a financial advisor, according to a survey by Statista. However, this number is still relatively low, considering the potential financial losses individuals may face due to insufficient knowledge about personal finances.

In 2023, the presumed average financial loss per person due to a lack of financial literacy was $1,506, according to the Financial Educators Council. When extrapolated to the entire U.S. population, the collective cost of financial illiteracy for Americans exceeded a staggering $388 billion in 2023. This highlights the importance of seeking professional guidance to make informed financial decisions and avoid costly mistakes.

If you have specific financial goals you want to achieve and want to protect your wealth, following these steps can help you find a financial advisor who can increase your financial literacy and support you on your financial journey.

Step 1: Determine What Services You Want

Financial advisors offer a wide range of services, and the specific offerings can vary from one advisor to another. Some of the most common services provided by financial advisors include:

1. Investment advice: Financial advisors are instrumental in guiding your investment choices, offering researched insights into diverse investment vehicles including stocks, bonds, mutual funds, and ETFs. They can create a diversified investment portfolio that aligns with your risk tolerance, financial goals, and time horizon. Advisors can also monitor and rebalance your portfolio regularly to ensure it stays on track.
2. Debt management: If you have outstanding debts, such as credit card balances, student loans, car loans, or mortgages, a financial advisor can help you develop a plan to pay off these debts efficiently. They can provide guidance on prioritizing debts, negotiating lower interest rates, and creating a budget to allocate funds towards debt repayment.
3. Budgeting assistance: Financial advisors can analyze your income and expenses to help you create a realistic budget that aligns with your financial goals. They can identify areas where you may be overspending and suggest strategies to reduce expenses and increase savings. By creating and sticking to a budget, you can better manage your cash flow and work towards achieving your short-term and long-term financial objectives.
4. Insurance coverage: A financial advisor can review your existing insurance policies, such as life insurance, health insurance, disability insurance, and property insurance, to identify any gaps in coverage. They can recommend additional policies or adjustments to ensure you have adequate protection against potential financial risks. Proper insurance coverage can help safeguard your finances and provide peace of mind.
5. Tax planning: Financial advisors can work with you to develop tax-efficient strategies that minimize your tax liabilities. This may include recommendations for tax-advantaged investment accounts, such as 401(k)s and IRAs, as well as guidance on charitable giving, tax-loss harvesting, and other tax-saving techniques. While not all financial advisors are tax experts, they can collaborate with tax professionals to ensure your financial plan is optimized for tax efficiency.
6. Retirement planning: Planning for retirement is a critical aspect of financial planning, and a financial advisor can help you navigate this process. They can assist you in determining how much you need to save for retirement, selecting appropriate retirement accounts, and creating a withdrawal strategy to ensure your retirement savings last throughout your golden years. Advisors can also help you plan for healthcare costs and long-term care expenses in retirement.
7. Estate planning: For those who want to leave a legacy and ensure their assets are distributed according to their wishes, financial advisors can provide guidance on estate planning. This may include establishing trusts, creating a will, designating beneficiaries, and developing strategies to minimize estate taxes. Estate planning can help you protect your assets and provide for your loved ones after you're gone.
8. College planning: If you have children or grandchildren, a financial advisor can help you create a savings plan to fund their higher education expenses. They can provide guidance on choosing appropriate college savings vehicles, such as 529 plans or Coverdell Education Savings Accounts (ESAs), and develop a strategy to meet your education funding goals.
9. Support and perspective: Beyond the technical aspects of financial planning, financial advisors can offer emotional support and perspective, particularly during times of market volatility or personal financial challenges. They can help you stay focused on your long-term goals, avoid impulsive decisions based on short-term market fluctuations, and provide reassurance and guidance when needed.

Step 2: Get to Know Advisor Types & Certifications

When searching for a financial advisor, it's essential to understand the different types of financial advisors and the certifications they may hold. This knowledge can help you choose an advisor who aligns with your needs and provides the level of expertise you require.

Types of Advisors

1. Fee-only advisors: These advisors are compensated solely by the fees they charge for their services, which may be a percentage of assets under management (AUM), an hourly rate, or a flat fee. They do not receive commissions from selling financial products, which helps minimize potential conflicts of interest.
2. Fee-based advisors: Fee-based advisors charge fees for their services but may also earn commissions from selling financial products. While they offer advice and charge fees like fee-only advisors, they may have a greater incentive to recommend products that generate commissions.
3. Commission-based advisors: These advisors are compensated primarily through commissions earned from selling financial products, such as insurance policies or mutual funds. They may not charge separate fees for advice, but their recommendations may be influenced by the commissions they receive.
4. Registered Investment Advisors (RIAs): RIAs are firms or individuals registered with the Securities and Exchange Commission (SEC) or state securities regulators. They are required to act as fiduciaries, meaning they must put their clients' interests first and disclose any potential conflicts of interest. RIAs typically charge fees based on a percentage of AUM.
5. Robo-advisors: These are digital platforms that use algorithms and technology to provide automated investment management and advice. Robo-advisors typically charge lower fees than human advisors and offer a more hands-off approach to investing.

Types of Certifications

While there are no federal guidelines dictating who can call themselves a financial advisor, several professional certifications demonstrate an advisor's expertise and commitment to acting in their clients' best interests.

Some of the most common and respected certifications include:

1. Certified Financial Planner (CFP): CFPs have completed extensive training and passed a rigorous exam covering a wide range of financial planning topics, including investment planning, tax planning, retirement planning, and estate planning. They are also required to adhere to a strict code of ethics and act as fiduciaries.
2. Chartered Financial Analyst (CFA): CFAs are investment professionals who have passed a series of three exams covering investment analysis, portfolio management, and ethical and professional standards. The CFA designation is widely respected in the investment management industry.
3. Certified Public Accountant (CPA) with Personal Financial Specialist (PFS) credential: CPAs who have earned the PFS credential have demonstrated expertise in both tax and personal financial planning. They can provide comprehensive advice on tax strategies, retirement planning, estate planning, and risk management.
4. Chartered Financial Consultant (ChFC): The ChFC designation is similar to the CFP, with a focus on financial planning. ChFCs have completed coursework in various financial planning topics and are required to have several years of professional experience.
5. Certified Investment Management Analyst (CIMA): CIMAs have completed a rigorous certification program focused on investment management consulting. They are trained to evaluate and select wealth managers, construct portfolios, and provide ongoing monitoring and performance reporting.
6. Chartered Life Underwriter (CLU): CLUs are insurance specialists who have completed coursework in life insurance, annuities, estate planning, and other insurance-related topics. They can provide guidance on risk management and insurance strategies as part of a comprehensive financial plan.

Step 3: Understand the Variety of Fee Structures

Financial advisors employ various fee structures, and it's crucial to understand how they are compensated before engaging their services. The most common fee structures include:

1. Fee-only: Fee-only advisors charge a transparent fee for their services, which may be based on a percentage of assets under management, an hourly rate, or a flat annual fee. They do not receive commissions from selling financial products, which helps minimize potential conflicts of interest.
2. Commission-based: Commission-based advisors are compensated through commissions earned from selling financial products, such as mutual funds, insurance policies, or annuities. While they may offer their services for "free," they have a financial incentive to recommend products that generate higher commissions, which may not always be in the client's best interest. It's generally recommended to be cautious when working with advisors who rely solely on commissions.
3. Fee-based: Fee-based advisors charge fees for their services but may also receive commissions from selling financial products. This hybrid model can create potential conflicts of interest, as advisors may be incentivized to recommend products that generate commissions.

When evaluating the costs of working with a financial advisor, it's essential to consider the following average fees:

• Assets Under Management (AUM): Human advisors typically charge around 1% of AUM, while robo-advisors often charge between 0.25% and 0.50%.
• Hourly rate: The average hourly fee for financial advisors is approximately $250.
• Per-plan cost: Some advisors charge a flat fee for creating a comprehensive financial plan, which averages around $2,000.
• Retainer fee: Certain advisors charge an ongoing retainer fee, which can average about $6,000 annually.

It's important to discuss fees upfront with potential advisors and understand exactly what services are included in their fees. Be sure to ask about any additional costs, such as transaction fees or expense ratios for recommended investment products.

Step 4: Shop Around

When searching for a financial advisor, it's essential to explore multiple options to find the best fit for your needs. Consider the following strategies:

1. Referrals: Ask friends, family members, or colleagues if they can recommend a financial advisor they trust. Personal referrals can provide valuable insights into an advisor's communication style, responsiveness, and overall quality of service.
2. Online research: Utilize online resources to research potential advisors. Look for advisors in your area using directories provided by professional organizations, such as:some text
   • National Association of Personal Financial Advisors (NAPFA)
   • Financial Planning Association (FPA)
   • Certified Financial Planner Board of Standards
3. Fee-only advisor networks: Consider searching for advisors through networks that exclusively feature fee-only advisors, such as:some text
   • Garrett Planning Network: Offers a directory of fee-only advisors who charge hourly rates for their services.
   • XY Planning Network: Features fee-only advisors who specialize in working with Generation X and Generation Y clients.

When evaluating potential advisors, consider factors such as their experience, expertise, communication style, and the types of clients they typically serve. Many advisors offer complimentary initial consultations, which can help you assess whether they are a good fit for your needs.

Step 5: Vet Your Advisor of Choice

Before hiring a financial advisor, it's crucial to conduct a thorough background check to ensure they are qualified, reputable, and have a clean disciplinary record. Use the following resources to vet your advisor of choice:

1. FINRA BrokerCheck: Visit the FINRA BrokerCheck website to research the background and disciplinary history of brokers and brokerage firms. This free tool provides information on an advisor's employment history, licenses, and any regulatory actions or customer complaints.
2. SEC Investment Adviser Public Disclosure: Use the SEC's Investment Adviser Public Disclosure website to search for registered investment advisors (RIAs) and access their Form ADV, which discloses information about their business practices, fees, conflicts of interest, and disciplinary history.
3. CFP Board Verify: If your advisor holds the Certified Financial Planner (CFP) designation, visit the CFP Board's Verify website to confirm their certification status and check for any disciplinary actions.
4. State securities regulators: Contact your state's securities regulator to inquire about any disciplinary actions or complaints against the advisor. You can find contact information for your state's regulator through the North American Securities Administrators Association (NASAA) website.
5. Online presence: Review the advisor's website, social media profiles, and online reviews to gain insight into their reputation, communication style, and client satisfaction. Keep in mind that online reviews may not always provide a complete picture, but they can offer valuable context.

By thoroughly vetting your potential advisor, you can make an informed decision and minimize the risk of working with someone who may not have your best interests in mind.

Step 6: Conduct an Interview to Ensure a Good Match

Once you've narrowed down your list of potential advisors, schedule interviews to assess if they align with your financial needs and preferences. To complement what you’ve learned from our guide, consider these insightful questions—further detailed in our previous article on hiring the right financial advisor:

1. What qualifications and experience do you have?
2. What services do you offer, and how do you tailor your advice to individual clients?
3. Are you a fiduciary, and do you always act in your clients' best interests?
4. How are you compensated, and what are your fees?
5. What is your investment philosophy, and how do you construct client portfolios?
6. How often do you communicate with clients, and through what channels?
7. What is your ideal client profile, and do you specialize in working with any particular types of clients?
8. Can you provide references from current or former clients?
9. How do you measure success, and what benchmarks do you use to evaluate portfolio performance?
10. What sets you apart from other financial advisors, and why should I choose to work with you?

During the interview, observe the advisor's communication skills, transparency, and their thoroughness in answering your questions. A competent advisor should clarify complex financial terms in an understandable manner and encourage your inquiries.

Step 7: Easily Share Your Finances with an Advisor Using Kubera

Once you've chosen a financial advisor, it's important to provide them with a comprehensive view of your financial situation. Kubera is a powerful wealth tracking tool that can help you securely share your financial information with your advisor, enabling them to provide more accurate and personalized advice.

Kubera allows you to:

1. Track all your assets in one place: Kubera supports a wide range of assets, including bank accounts, investment portfolios, real estate, vehicles, collectibles, and even digital assets like cryptocurrencies and domain names. By consolidating your assets in one platform, you can easily monitor your net worth and share a complete picture of your finances with your advisor.
2. Securely share data with your advisor: Kubera offers secure sharing features that allow you to grant your advisor access to your financial data. This eliminates the need for manual data entry or the exchange of sensitive information via email, reducing the risk of data breaches or privacy concerns.
3. Collaborate with your advisor: Kubera's intuitive interface and comprehensive reporting features enable you to work closely with your advisor to track your progress, identify areas for improvement, and make informed financial decisions. Your advisor can use Kubera to monitor your assets, provide timely advice, and help you stay on track to achieve your financial goals.
4. Benefit from advisor-specific features: Kubera offers features designed specifically for financial advisors, such as client management tools, customizable reporting, integrated billing, team access control and custom white label portal . By choosing a financial advisor who uses Kubera, you can ensure a seamless and efficient collaboration process.

Sign up for Kubera today and take the first step towards a more organized and transparent financial future.

Conclusion

Finding the right financial advisor can be a game-changer for your financial well-being. By understanding the different types of advisors, their certifications, and fee structures, you can make an informed decision when choosing a professional to guide you on your financial journey.

Remember to thoroughly vet potential advisors, conduct interviews to ensure a good fit, and consider using wealth tracking tools like Kubera to streamline the collaboration process. With the right advisor by your side, you can achieve your financial goals, secure your future, and enjoy greater peace of mind.