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 1. Financial Advisors
 2. Investing
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HOW TO FIND A FINANCIAL ADVISOR IF YOU'RE NOT RICH

Here are the options for middle-class investors seeking financial advice.

By Coryanne Hicks
|
June 7, 2022
By Coryanne Hicks
|
June 7, 2022, at 5:08 p.m.
Save
More

Find a Financial Advisor if You're Not Rich

More

When choosing a financial advisor, keep in mind what services you're looking
for.(Getty Images)

Financial advice isn't just for the wealthy.

In fact, the right guidance early in your financial life can have the biggest
impact on your long-term success. Many financial advisors, however, aren't
interested in working with the middle class.



Many firms in recent years have stopped paying commissions to brokers for
accounts that are considered small, including accounts ranging from $100,000 to
$500,000 in assets. Firms that do take less than those minimums sometimes charge
as much as 2% in annual fees, though 1% is more typical.

So what should a middle-class investor do to find a good financial advisor?
Experts recommend understanding these elements of the financial advising
industry:

 * How much will a financial advisor cost you?
 * How do financial advising fees work?
 * Where to look to find a financial advisor near you.
 * Things to consider when finding a local financial advisor.
 * What questions should you ask?
 * How do you avoid getting scammed?



[ 

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HOW MUCH WILL A FINANCIAL ADVISOR COST YOU?

Financial advisors typically charge fees based on how much money you have with
their firm, called assets under management, or AUM. The industry average is
around 1% of AUM per year, although some firms can go up to 2% per year. This
fee is typically deducted from your accounts on a quarterly basis. So if you
have $250,000 with an advisor charging 1% per year, you can expect to pay $625
every three months.




HOW DO FINANCIAL ADVISING FEES WORK?

Many firms will have a sliding scale for their fees. The more assets you have
with them, the lower their fee. So while 1% is the average for $1 million
accounts, smaller balances may pay closer to 1.2%, on average. Larger accounts
could pay 0.4%.



Other fee-only advisors may charge an hourly or per-project fee. Meanwhile,
commission-based advisors receive commissions from the investments they sell.
Some advisors, known as fee-based advisors, charge both a fee and commissions.

Some advisors include financial planning in their fees for managing your
investments, while others charge a separate fee for advice. As for how much
you'll pay, it will vary depending on where you live and the scope of the work
you're requesting. Some advisors may charge a couple thousand dollars for a
comprehensive plan. Others may charge around $100 to $400 an hour to dispense
financial advice.



Stephanie Genkin, founder of My Financial Planner LLC and a certified financial
planner in Brooklyn, New York, charges hourly – as opposed to by AUM. Most
fee-only advisors charge according to assets and therefore have minimum
thresholds an individual needs to have in their investment account before
they'll even consider the person as a client. How much is the minimum? It
varies, of course, but often you'll need at least $50,000 before many advisors
will consider working with you.

"That means most middle-class people are automatically excluded from service, as
they don't have enough in investments to manage," Genkin says.



HOW TO CHOOSE A FINANCIAL ADVISOR

Financial advisors are everywhere. The challenge is knowing how to pick the
right advisor for you.

Coryanne HicksMarch 25, 2022






WHERE TO LOOK TO FIND A FINANCIAL ADVISOR NEAR YOU

There are several places to look for a financial advisor near you:

 * Use an online advisor search. U.S. News has an online database of financial
   advisors across the country. You can use the search to find advisors in your
   area and learn more about their specialties and experience.
 * Ask friends, family or colleagues for recommendations. You'll be more likely
   to find somebody who will work with you if your friends, family members or
   colleagues are in a similar tax bracket as you.
 * The Garrett Planning Network. Garrettplanningnetwork.com offers a map of the
   United States where users can click on a state and find a list of financial
   advisors who cater to the middle class.
 * The National Association of Personal Financial Advisors. The association's
   website, napfa.org, allows you to find a financial advisor near you.
 * XY Planning Network. Justin Chidester, owner of Wealth Mode Financial
   Planning in Logan, Utah, considers this "the leading association of advisors
   in the middle to middle-upper income or wealth tier." Search by location and
   specialty on the network's website to find local fee-only advisors.
 * The CFP Board. The CFP Board's website, cfp.net, can help you find local
   advisors with the certified financial planner (CFP) designation, which helps
   distinguish holistic planners from advisors who offer only investment
   management services.
 * Robo advisors. You may want to consider an automated portfolio management
   service as a cost-effective option. For example, with Schwab Intelligent
   portfolios, you don't pay advisory fees or commissions, though you will need
   $5,000 to get started. Meanwhile, Betterment, another popular robo advisor,
   has no minimum account requirement and charges an annual advisory fee of only
   0.25% on all assets under management. Once you have $100,000, you can also
   access more premium features for a 0.4% annual fee.
 * Search engines. This one may seem like a no-brainer, but the power of search
   engines can't be overlooked. Chances are a search engine is how you found
   your way here. So if none of the above prove fruitful, consider a quick
   Google search for "financial advisor near me" or "financial advisor for the
   middle class." If you know you want someone to help with financial planning
   as opposed to just buying and selling, you may want to include "fiduciary" in
   your search terms. This way, you'll be able to locate fee-only advisors and
   not commission-based brokers.
 * The Accredited Financial Counselor (AFC) website. "I would strongly encourage
   true middle-income people to look (at findanafc.org) for an accredited
   financial counselor," Chidester says.

You've probably heard of certified financial planners, but accredited financial
counselors have been around for a while too, according to Chidester.

"They often have a focus on helping low- and middle-income people, at affordable
prices, with topics relevant to everyone – saving, budgeting, paying debt,
improving credit, preparing to buy a home and working through poor habits with
money," Chidester says.



He adds that they can't legally provide investment or insurance advice, but they
can provide great education about any financial topic and point you in the right
direction for those things.

When considering cost, remember that an advisor's compensation is about more
than just how you're billed. A fee-only advisor is likely to be a fiduciary, who
won't be swayed by conflicts of interest, while an advisor who earns commissions
may be incentivized to place you in investments that earn her the highest
commission.



Fiduciary financial advisors are legally bound to put your needs before their
own. A financial professional who has a suitability requirement is legally bound
to provide products that are suitable for your needs, but they may not be the
very best for you.

That doesn't mean somebody who upholds the suitability standard isn't going to
look out for you – but it does mean that the rules for those advisors are less
stringent.

Registered investment advisors, investment advisor representatives and certified
financial planners all carry fiduciary-level responsibility. You can easily spot
these titles on business cards, websites and email signatures. Chartered
retirement planning counselor and accredited investment fiduciary are other
designations that indicate a fiduciary responsibility.

Flat-fee and retainer-based advisors are also more likely to provide holistic
planning and guidance, something investors with fewer assets may find hard to
come by in the industry, Chidester says.

Most advisors who are willing to work with clients whose assets are only $50,000
"will do nothing other than set up an asset allocation once, house your
investment accounts for you, then call or email the client once per year to
satisfy a regulatory requirement for satisfactory care," he says. If that's all
you want, then this is fine. But if you want more holistic guidance, you may
want to target retainer-model advisors.

"The leading organization of retainer model planners is the XY Planning
Network," Chidester says. "They are an especially good fit for those who have
moderate to high incomes but low assets, or for consumers who feel they are
getting overcharged for services on a percentage-based fee, simply because their
portfolio is large, and not because their situation is overly complex."



When choosing a financial advisor, think about what services you're looking for.
Are you seeking help with financial and retirement planning or looking for
someone to help you buy and sell investments? If it's the former, you'd likely
be better served by a fee-only advisor. With the latter, a commission-based
advisor could help you keep costs down by not charging for unneeded services.


THINGS TO CONSIDER WHEN FINDING A LOCAL FINANCIAL ADVISOR

There are a few things to keep in mind when looking for a local financial
advisor:

 * Firm size. Financial advisors can run their own small practice or be part of
   a larger firm. Neither type is necessarily better than the other, but it's
   worth thinking about which style may better suit your needs. For instance,
   larger firms can sometimes provide a broader range of investments and at a
   lower cost, while smaller firms may emphasize their style of financial
   guidance to differentiate themselves.
 * Credentials. Anyone can call him or herself a financial advisor, so it's
   important to look at what comes after your advisor's name. What credentials
   or certifications does she have? What training has the advisor had?
 * Expertise. An advisor's credentials can give you insight into her areas of
   expertise. For example, if an advisor is a certified retirement financial
   advisor, or CRFA, you can bet she specializes in retirement planning.
 * Office type. Virtual financial planning offices have become more common since
   the coronavirus pandemic, but firms can offer varying degrees of virtual
   planning. Think about whether you'd rather meet with your advisor virtually
   or in person before choosing an advisor.




QUESTIONS TO ASK FINANCIAL ADVISORS

Come prepared when you interview a potential financial advisor.

Coryanne HicksApril 4, 2022






WHAT QUESTIONS SHOULD YOU ASK?

Are you looking for help with investments and retirement planning or for someone
to go to when you have questions? Knowing what you're looking for in a financial
advisor is the first step to finding the right advisor for you. Knowing how to
match an advisor to your needs is the second step. Ask any potential financial
advisors these questions:

 * What services do you provide?
 * What type of clients do you typically work with?
 * How will we communicate with each other? How often will I hear from you?
 * Are you a fiduciary?
 * How are you compensated? And how much will I be charged for your services?

As for what you might discuss with a financial advisor, it can run the gamut. In
Genkin's case, she says, "I work with students and young adults saddled with
student loans to help them create realistic debt repayment plans, self-employed
individuals who need help figuring out what they can do to save for retirement,
and new families who have limited resources and would like to save for a down
payment on a home and start a college savings plan for their baby at the same
time."



She also points out that you may not need many hours, at first, with a financial
advisor. If you're just starting this journey, you probably have fewer assets,
and you just need that initial guidance. By the time you need more help to
manage your assets, you'll presumably have more money, and paying for more
financial advice won't be as challenging.




HOW DO YOU AVOID GETTING SCAMMED?

To avoid getting scammed, make sure to get references and check out everything
you can find on the financial advisor online first. And keep in mind, almost
everyone pays something when they hire a financial advisor – and not everyone is
out to get you.

But after you find a financial advisor, you want to make sure you're in sync.
You'll want to get a sense of whether your advisor has a financial philosophy
that lines up with yours.

And the most important question of all? "Ask how they can help you reach your
goals," says Brett Anderson, a certified financial planner and president of St.
Croix Advisors. He also suggests asking the advisor, "Based on my personal
situation, would I be a good client fit for your firm?" If the answer is no,
that's OK. Just keep searching until you find the right fit, he says.

And if you're anxious that you don't make enough money for a financial advisor
to work with you, just tell the advisor upfront what you earn and about your
overall financial health, Anderson says. Advisors may want to have a dialogue
even before they schedule an initial meeting with you, he says. "Be honest. Just
lay it all out. You'll save everyone time and, most importantly, you'll find the
right advisor for you."

And the more time you save in looking for a financial advisor, the faster you
can get started making your money work for you.



7 BEST MOVIES FOR FINANCIAL ADVISORS

View All 10 Slides



Updated on June 7, 2022: This story was published at an earlier date and has
been updated with new information.

Tags: investing, money, wealth, retirement, financial advisors, financial goals,
financial literacy


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Comparative assessments and other editorial opinions are those of U.S. News and
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such as banks, credit card issuers or travel companies. The content on this page
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