In addition to making sure that your assets are invested appropriately, financial advisors can be helpful in certain financial situations.

Financial events that may warrant advice from a financial advisor:  

• You have a significant life change, like getting married, having a child, or getting divorced.
• You gain a significant income, such as inheriting a large sum or getting promoted.
• You plan to retire soon. 

Depending on the financial advisor's expertise, they can offer a range of services that give you a comprehensive view of your current financial situation and advice on moving forward in your financial journey. 

Some of the services include: 

1. Retirement Planning: Financial advisors can help you envision what your life will be like when you become financially independent or retire and help you build funds to meet this ultimate goal.  
2. Estate Planning: Financial advisors can review your estate documents and collaborate with your estate attorney to create a plan to pass on your wealth to the people who mean the most to you. 
3. Tax Planning: A well-educated financial advisor can help you find ways to reduce the taxes you pay in the short and long term. 
4. Budgeting Help: Financial advisors are experts in understanding how their client's money flows in and out. Advisors can help you create a budget that limits unnecessary fees, accounts for expenses that are meaningful to you, and enables you to save for your financial goals. 
5. Debt Management: Financial advisors can help you create a plan to pay off your outstanding debts efficiently.  
6. Investment Advice: Financial advisors can help you research different investment options and create an investment portfolio that meets your desired risk and financial goals. 
7. Insurance Evaluation: Financial advisors can evaluate your current insurance policies, identify gaps in your coverages, and recommend new insurance policies if needed.
8. Education Planning: If you plan to go back to school or pay for your child's education, financial advisors can help you decide the more tax-efficient way to pay for it.

The federal government does not regulate who can call themselves financial advisors. Unfortunately, the financial advisor term has been used as a blanket term for many finance professionals; not all have your best interests in mind. Therefore, evaluating your potential financial advisor to see if they are a good fit for you is essential. 

Regardless of which financial advisor you decide to work with, you should understand how they earn money. This will help determine whether their recommendations are best for you or their wallets. 

Commission-Only Advisors

Commission-based advisors earn money by earning sales commissions by selling financial products such as mutual funds, annuities, and life insurance. Because these advisors earn money from a third party, some may advertise themselves as free. 

If you decide to work with an advisor who earns sales commissions, it is essential to be extra careful. Commission-based advisors are incentivized to sell you products with higher commissions rather than make recommendations that are best for you. 

Fee-Only Financial Advisors

Fee-only financial advisors earn money from the flat fees that they charge for their services. These fees may be charged as a percentage of your assets or a predetermined flat or hourly rate. Mostly all fee-only financial advisors are fiduciaries, which means they are legally bound to make recommendations that are in the best interest of their clients. Generally, these advisors choose this business model to limit potential conflicts of interest that come with selling investment and insurance products. 

Fee-Based Advisors

Fee-based advisors earn a pre-stated fee from their clients, plus a commission through selling products or making investment transactions. These advisors can have similar conflict of interest issues to that of a commission-only advisor. 

Robo-Advisors 

Robo-advisors provide low-cost investment management services. The disadvantage of robot advisors is that they can't give you specific advice or help you plan for your future. 

Like a 401(k), the advisor will ask you questions and then build a portfolio based on your risk tolerance and goals. The program monitors an investment portfolio and makes changes when needed. 

Financial advisors come in many forms; therefore, it is important to find one you can trust to lead you in the right direction. 

When looking for a financial advisor, you can ask friends or family for recommendations, or you can look for an advisor online. Many financial associations provide free databases to find a financial advisor near you: 

• NAPFA
• FPA(Financial Planning Association)
• Garrett Planning Network
• XY Planning Network
• ACP(Alliance of Comprehensive Planners)

When evaluating your prospective financial advisor, consider their experience and credentials. You can review any disciplinary actions or complaints against a financial advisor by using FINRA's Broker Check. 

Questions to Ask A Financial Advisor

For you to be prepared for your first meeting with a prospective financial advisor, here are some questions to help you learn and understand who you are planning to work with:

1. How are you compensated?
2. What services do you offer?
3. How can you help me reach my financial goals?
4. Are there any conflicts of interest that we have not discussed?
5. Are you held to the fiduciary standard at all times?
6. What professional designations do you hold?
7. Do you have any assets or income minimums?
8. How many times and how often do we meet?
9. Are you willing to collaborate with my other advisors, like a CPA or attorney?

Because of the diverse types of financial advisors, it is important to find the right financial advisor who meets your financial needs. Once you can find the right advisor for you, they can help you navigate difficult financial decisions and help you create a plan to reach your financial goals. 

About the Author

Danielle Miura, CFP®, is the founder of Spark Financials, a life and financial planning firm specializing in helping Sandwich Generation families manage their money. As a CERTIFIED FINANCIAL PLANNER™ professional, Danielle specializes in comprehensive financial plan development, financial education, and financial research.