# How do you choose a financial adviser?

> Pick a fiduciary, know exactly how they're paid, check their record for free, and compare the fee to what you get.

Source: https://www.walletprep.com/learn/choosing-a-financial-adviser/ · Updated 2026-10-04 · Investing

To choose a financial adviser, decide what help you need, look for someone who must act as a fiduciary at all times, understand exactly how they are paid, and check their record for free on the SEC and FINRA lookup tools. Fees matter a lot: in the example, a 1% yearly fee on $50,000 costs about $36,000 over 20 years.

## Key facts
- **There are several ways advisers get paid.** Some charge a percentage of the assets they manage each year, often called an asset-based fee. Others charge by the hour, a flat fee per plan or a yearly retainer. Some earn commissions on products they sell. Some combine these.
- **The standard of care differs.** Registered investment advisers owe a fiduciary duty that covers the whole relationship. Brokers must act in your best interest when they make a recommendation, under the SEC's Regulation Best Interest, but not necessarily afterward.
- **Small fees compound into large ones.** A fee taken as a percentage of your balance is charged every year on a growing amount. Even small ongoing fees can have a large effect on what you end up with over decades.
- **Every firm must disclose its record.** Investment advisers and brokers give you a relationship summary, Form CRS. Advisers also give a brochure explaining fees and conflicts. Disciplinary history is searchable for free on Investor.gov and BrokerCheck.

## Decide what kind of help you need
Write down the question you want answered. "Should I pay off my student loans or invest?" or "How should I invest my 401(k)?" can often be handled in a single paid session. "Manage all my investments and taxes as my income grows" is ongoing work.
Financial planners look at your whole picture: budget, debt, insurance, retirement and taxes. Investment managers focus on choosing and running your investments. Automated advisers, sometimes called robo-advisers, build and rebalance a portfolio for a lower fee, with little or no personal advice.

## How advisers are paid
An asset-based fee, for example 1% a year, is charged on everything the adviser manages, whether or not anything changes in your account. Hourly and flat fees are paid for specific work, so you know the cost up front. Commissions are paid when you buy a particular product, such as an annuity, insurance policy or certain mutual funds.
Each model has conflicts. A commission can reward selling you a product, and an asset-based fee can reward keeping your money invested with the adviser rather than paying off a mortgage. Fee-only advisers, who take no commissions, remove the product conflict. Ask any adviser to explain, in dollars, every way they will be paid.

## Fiduciary duty and best interest
A registered investment adviser has a fiduciary duty under federal law. It requires advice in your best interest based on your goals and full disclosure of any conflicts, and it covers the whole relationship.
Brokers follow Regulation Best Interest, which requires them to act in your best interest at the time they make a recommendation. Many professionals are both, acting as an adviser for some accounts and a broker for others, so ask which hat they wear for each account you open.

## Check their background for free
Before you hand over money, search the person and the firm with the free "Check Out Your Investment Professional" tool on Investor.gov, which shows whether they are licensed and registered. FINRA BrokerCheck shows registration, work history, customer complaints and disciplinary actions for brokers.
Read the firm's Form CRS, a short plain-language summary of services, fees, conflicts and legal history. For advisers, also ask for the brochure, which lists the fee schedule and whether fees can be negotiated. If someone claims to be registered but doesn't appear in these tools, walk away.

## Questions to ask in the first meeting
The SEC suggests questions like these: What services will I get and how often? If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me? Who will make decisions for my account, and what are their qualifications? How might your conflicts of interest affect me? Do you have any disciplinary history?
A good adviser answers clearly and in writing, and doesn't rush you. Pressure to decide today, promises of high returns with little risk, or vague answers about fees are reasons to keep looking.

## A worked example: what a 1% fee costs over 20 years
Chris has $50,000 to invest and is offered management for 1% of assets a year. Assume a 7% yearly return before fees, so the fee leaves about 6%. Returns vary and can be negative.

- Assumed return before fees: 7%
- First-year fee (1% of $50,000): $500
- After 20 years at 7%: $201,937
- After 20 years at 6%: −$165,510
- Cost of the 1% fee: = $36,427

1. The first year, the fee is $50,000 × 1% = $500. It is charged again every year on a bigger balance.
2. With no fee, $50,000 grows to about $201,937 in 20 years at 7%. At 6% it grows to about $165,510.
3. The difference is $201,937 − $165,510 = $36,427. That is what the fee costs, so the advice should be worth at least that much.

### $50,000 after 20 years, assuming 7% before fees, with no fee, a 0.5% fee and a 1% fee

| Annual return | Balance after 20 years | Of which growth |
| --- | --- | --- |
| 7% | $201,937 | $151,937 |
| 6.5% | $182,822 | $132,822 |
| 6% | $165,510 | $115,510 |

## Common mistakes
- **Hiring a friend without checking.** Family friends and people from church or work can be great advisers, or not. Run the same free background check on them as you would on a stranger.
- **Not asking about total cost.** The adviser's fee is only part of it. Funds inside the account charge their own expense ratios, and some products have sales charges. Ask for the total yearly cost in dollars.
- **Buying a product you don't understand.** If you can't explain how an annuity, insurance policy or fund makes money for you and for the person selling it, don't buy it yet. Ask for the explanation in writing.

## Questions people ask
### Do I need a financial adviser?
Not always. If you have a 401(k), an emergency fund and a simple index or target-date fund, you may need little help. An adviser can be worth it for big decisions, complicated taxes, an inheritance, or if you know you'll panic in a market drop.

### What is a fee-only financial adviser?
A fee-only adviser is paid only by you, by the hour, a flat fee or a percentage of assets, and takes no commissions on products. Fee-based is different: it usually means fees plus commissions.

### How much does a financial adviser cost?
It varies a lot. Asset-based fees are charged as a percentage of your balance each year, and automated services usually charge less than a person. Hourly and flat-fee planners set their own prices, so get quotes in writing from two or three and compare them in dollars.

### What is the difference between a financial adviser and a financial planner?
The terms overlap. "Financial adviser" is a general title, while an investment adviser is a legal category registered with the SEC or a state. A planner usually covers your whole financial life, not just investments. Check registration, not titles.

## Do this today
Write down the one money question you most want help with. If you have an adviser already, look them up on Investor.gov and BrokerCheck, then find your total yearly fees in dollars on your last statement or ask for them.

## Sources
- [SEC Investor.gov: Opening an investment advisory account](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-44)
- [SEC Investor.gov: Working with an investment professional](https://www.investor.gov/introduction-investing/getting-started/working-investment-professional)
- [SEC Investor.gov: Form CRS relationship summary](https://www.investor.gov/CRS)
- [SEC staff bulletin: Standards of conduct for broker-dealers and investment advisers](https://www.sec.gov/about/divisions-offices/division-trading-markets/broker-dealers/staff-bulletin-standards-conduct-broker-dealers-investment-advisers-conflicts-interest)
- [FINRA BrokerCheck](https://brokercheck.finra.org/)
- [SEC: Investment Adviser Public Disclosure](https://adviserinfo.sec.gov/)

_General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act._