Do I need a financial adviser?

Man with child wonders "Do I need a financial advisor?"Image: Man with child wonders "Do I need a financial advisor?"

In a Nutshell

A financial adviser is a professional who helps you manage your money and investments, and can help you create a long-term financial strategy. Working with a financial adviser may put you at ease with your personal finances, but beware of paying for services that you don’t really need.
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A financial adviser might help you manage your money better than you can on your own, but don’t waste money on an adviser if you can handle it yourself.

Many public schools don’t teach much, if anything, about personal finance. So unless you grew up with parents who instilled vital money and investment skills in you as a child, you may have been left to figure it out on your own. With so much at stake, many Americans turn to a financial adviser for help, but that help can come with a price tag. That might leave you wondering: Do I need a financial adviser? The answer is … it depends.

Depending on your income, savings, investments, debt and a host of other factors, including your overall financial knowledge, a financial adviser could be very useful for you. But in some cases, it may be a waste of money. Learn more about what financial advisers do, how they make money, and whether one makes sense for your personal finance needs.



What does a financial adviser do?

A financial adviser is a financial professional typically responsible for helping you with investment management, personal finance strategies and financial planning. Some financial advisers can act as a sounding board and provide advice while you manage your own money, and others are full-service investment managers that handle your investments directly.

A traditional financial adviser is licensed to give you specific investment advice. While you are busy at work or spending time with your family, your financial advisers should be regularly working to stay up to date on the latest investment news and trends. This can allow them to give you financial advice you may not otherwise know about.

In addition to traditional advisers, a new crop of digital financial advisers have popped up, dubbed “robo-advisers.” These computer-driven investment platforms may not give the same advice as a human adviser. Instead, they typically follow a series of algorithms to invest your funds for you based on your risk tolerance.

But where robo-advisers manage investments, a full-service financial adviser can help you with a wide range of financial goals that go beyond your investment portfolio. They may be able to help you with budgeting, planning for retirement or sending children to college, or even merging your finances with those of a new spouse. Each financial adviser is different, so ask which services they can provide before hiring them.

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You might be reading this thinking, “Wait a minute — I can figure all of that out myself for free!” That is 100% correct! There is almost nothing a paid financial adviser can do for you that you can’t do yourself if you put your mind to it. What’s the value in working with a financial adviser, then? It may be when their financial expertise leads them to manage your money better than you could.

To decide if a financial adviser is worth the cost to you, it’s important to understand the costs involved. The way some financial advisers get paid may surprise you.

How do financial advisers get paid?

If you don’t have much confidence with your finances and have decided you do need a financial adviser, it’s important to understand how they get paid and how you can save money on fees. If you choose the wrong financial adviser, you could end up working with someone who puts their interests before your own!

Most financial advisers are paid one of three ways. First, there are fee-only advisers that get paid a fixed fee or an hourly, monthly or annual rate for their services. Second, some advisers charge you a percentage based on the assets they’re managing for you. Third, there are some advisers that earn a commission on the products they sell. For investors who don’t know what they’re doing, a fee-only financial adviser could be the best choice, because those advisers generally have less of an interest in selling you something you don’t need or pressuring you to invest more money than you’re comfortable with.

You should look out for advisers who are paid a commission — meaning that the adviser gets paid for investing dollars in specific products. You may want to avoid this type of adviser, as they have a financial incentive to do something that is good for them even if it may not be beneficial for you.

You may ask, “Aren’t there rules against that?” It’s not illegal to work on commission, but there are such things as fiduciaries. A fiduciary is an individual, such as a financial professional or family member, who is given the responsibility of managing someone else’s money or property and is required to put that person’s financial interests ahead of their own when managing it. Fiduciaries are legally required to manage your money for your benefit. To find out if an adviser is a fiduciary, just ask.

Do you really need a financial adviser?

If you are confident with your skills and knowledge when it comes to budgeting, retirement planning and investing, you may not need a financial adviser. You don’t need an MBA or years of education to make smart decisions with your money.

If you can take the time to read up on personal finance, make sure your retirement savings and investments are on track, and work to achieve other financial goals, you’re likely just fine managing your money yourself.

If you want a little help with investments but can handle the rest, a robo-adviser could be a good option. Robo-advisers can help you build an investment portfolio and manage your investments for you, and at fees far below what a human adviser would likely charge.

But even if you don’t want extensive help with your money, there’s no shame in hiring a professional to assist you in getting on a path toward your ideal personal-finance future. Just make sure you don’t overpay, and do pick an adviser that puts your needs and goals first.


Bottom line

A financial adviser isn’t right for everyone, but in some cases it’s worthwhile to hire an investment pro to help guide you. If you need help with your portfolio or just a second set of eyes on your financial plan, a fee-only financial adviser may be just what you need.


About the author: Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He has an MBA in finance from the University of Denver. When he’s away from the keyboard, Eric enjoys exploring the world, flying small… Read more.