How to Choose a Financial Advisor

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How do you know if you need a financial advisor? In today’s unpredictable world of finance and investing, everyone could use a helpful guide to handle the changes and implement their own skills and knowledge to create a solid and stable financial plan for the future. 

Have you ever wondered if you should find a financial professional to lead you on this path? The following passages will help you decide if that is a good option.

Just the Nuggets

  • A financial advisor is an experienced and licensed professional who helps clients create a unique financial plan for the future.
  • To have a financial advisor is to create a lasting and impactful relationship with them, who will be able to improve all areas of your financial life.
  • One of the most important requirements for financial advisors is to own some type of a license in this area, such as Series 6, Series 7, Series 63, or Series 65.
  • The three types of financial advisors to choose from are human, robo, and digital.
  • In order to find a suitable financial advisor, it is important to note what you want to achieve with your personal finances in the long run.

What is a Financial Advisor?

A Financial Expert

A financial advisor is a person with a lot of experience and knowledge in the area of handling finances despite the many ups and downs affecting the economy. They apply their skills and expertise to help individuals and companies plan their finances in a way that will help their progress and significant returns on investment over time. 

A Financial Strategist

A financial advisor is able to plan way ahead to construct a deep insight into the future that can sometimes go as far as 20 years. This implies that they need to conduct a lot of detailed research, as well as have knowledge in other areas of the business. This way, they can take into consideration the widest selection of factors contributing to the broader financial landscape.

A Financial Planner

A financial advisor is dedicated to making a reliable financial plan for their clients—not only in the investment sector but also in other parts of the financial outlook, including savings, budgeting, insurance, and many other factors. This means it is imperative for a financial advisor to maintain communication with their clients so they can keep each other updated on the developments, needs, and possible changes in perspective that could affect these financial plans.

A Financial Educator

A financial advisor is tasked to help their clients understand the area of finance and the terms like savings, insurance, and other key facts that will come into play within their financial plan. At the beginning of that journey, the clients are usually concerned with simple factors such as budgeting and savings. Further down the line, they will get acquainted with more advanced terms and matters such as tax planning, insurance, and other types of investing.

Qualifications of a Financial Advisor

There are a lot of things and unique moves a financial advisor can do for you in the area of financial planning. Oftentimes, a financial advisor is the first point of contact when you decide to plan for your future in terms of savings or retirement. After all, they are licensed professionals who can provide you with an insight you wouldn’t be able to have otherwise. 

Speaking of, what are the licenses financial advisors need in order to be able to do their job?

Although the regulation is still not so strict in this area, it goes without saying that a financial advisor should have proper licensing to enter the world of investing and provide services to their clients.

1. Series 6 License

This type of license is administered by the Financial Industry Regulatory Authority (FINRA). It implies that the license holder is able to sell packaged securities, such as mutual funds or variable annuities. However, this license does not allow them to sell individual stocks or bonds. This is typically the license type financial advisors begin with before progressing to more comprehensive licenses.

2. Series 7 License

Series 7 is the most difficult licensing type to obtain. It is also provided by FINRA, and it allows the financial advisors to sell nearly every type of investment available on the market—from stocks and bonds to options and futures. The only exception is the commodities. Starting in 2018, all financial advisors and other professionals are required to take a Securities Industry Essentials exam in order to obtain this license.

3. Series 63 License

This license is a formal type of permission to provide financial services within the borders of a certain country. It requires the professionals to pass a general exam that mostly deals with the areas of different laws and regulations regarding different countries and their stance on providing financial services.

4. Series 65 License

The Series 65 License could be obtained by financial advisors who already own the Series 7 License. This type of licensing also deals mostly with laws and regulations, with another addition—namely, Series 65 refers to the advisors who are compensated with fees instead of commissions. While the non-Series 7 holders could also qualify for this license, the exam is somewhat more difficult for them to pass.

Human, Robo, or Digital?

With the advanced progress of technology, new types of financial advisors are emerging in the financial sector. The latest innovation in this area is the robo-advisor—a software that deals with financial planning instead of a human professional. Although their work structure is entirely different, the goal remains the same. That is, to create a solid financial plan for the clients on which they can rely on for many years.

Their most important advantage is, they are constructed of software that is constantly learning. A software is able to take in and implement new knowledge and skills much better and faster than a person ever could. Here, the most obvious and crucial pro is the speed, as well as much lower costs that come with it.

On the other hand, human financial professionals remain the number one choice of many clients, especially more traditional ones. Simply, the clients find this experience a lot more comfortable and reassuring than the robo-advisor. With a human financial advisor, the clients can rely on their experiences and personal thoughts about the unique financial plan they are creating.

Lastly, the digital financial advisor provides an automated planning experience, which many clients find comforting and secure. It is also able to provide different levels of service when it comes to managing their assets—from advice to implementation of the investment strategy.

Further Reading:
Robo-Advisors vs Real-Life Wealth Advisors: How to Choose? by Premier Financial Group

Types of Compensation

There are two main compensation models financial advisors can base their work on. While the commission-based type is more common and traditional, more and more financial professionals are emerging with the fee-based model which is proving to be more effective and a lot easier in the long-run.


Commission-based financial advisors have a limited area in which they can function when dealing with clients and their financial plans. When they buy and sell securities, they receive commissions from the companies they purchase the assets from—not from their clients. Since the global financial crisis of 2008, the investors have become a bit skeptical of these financial advisors. The reason for that is they only deal with investment strategies but do not take the larger picture into consideration.


On the other hand, fee-based financial advisors collect income directly from their clients. They also offer a much wider selection of services—from retirements and savings plans to tax strategies and budgeting. It is considered that this type of financial advisors has the clients’ best interest at heart since they earn revenue, regardless of the outcome, only for the service they provide.

Hiring a Financial Advisor

There are more than a few signs that you need a financial professional to step in and help you handle your finances, whether that is the lack of an investment strategy or your difficulty to save money. To help you on that journey, here are some of the most common questions you should ask your potential financial advisor before hiring them.

“How do I invest my savings?

The best way to check the expertise of your financial advisor-to-be is to ask them questions you do not know the answers to. These questions should be direct and as detailed as possible because this would be the basis of your entire journey with them.

The most common point of clash for many clients is the fact that they were able to save up a significant amount of money during their time, but they never invested any of it. While investing can significantly up your profits, there is also a serious risk of losing more than what you planned. So an expert financial advisor should answer the question of smart and efficient savings-investment since there are many smart opportunities for that on the market today.

“Why am I constantly losing money?”

Despite their best efforts, a lot of people are just unable to acquire a significant amount in savings. There are many reasons for it, including them not being able to manage their finances properly with the market crashing before their eyes. Regardless of the reason, it is a financial advisor’s job to identify it and show the client how to turn that flaw into an advantage for future financial planning.

“Do I need an estate plan?”

A smart and experienced financial advisor will tell you that it would be prudent to create an estate plan—a detailed list of how your finances will be handled in case of your demise. An important part of this plan is insurance, which will make sure that your funds and assets are secure regardless of what happens to you in the future.

“How do I determine my financial health?”

The term financial health is commonly used to determine the main points and facts contributing to your current financial situation. A good financial advisor will try to get the general idea of your financial health through a questionnaire touching each subject of your finance—from savings and retirement to gifts and inheritance.

The crucial part of your financial health is your risk tolerance and risk capacity. These facts are unique for every individual, and they can determine the entire financial plan depending on the smartest asset allocation.

How to Find the Right Financial Advisor for You

According to the 2019 Planning & Progress Study conducted by Northwestern Mutual, over 92% of Americans prefer their finances to be organized in all areas by a licensed professional with several years of experience. Simply, it helps them feel confident and secure and makes it easier for them to track their savings and spendings. 

Here are the steps to take when finding a suitable financial advisor for your needs.

1. Determine if you need one

While having a financial advisor may give a lot of benefits, it also requires a lot of patience and dedication on your part. The relationship you’ll create and maintain with your financial advisor is a lasting and impactful one, so it requires a lot of work from both parties. Depending on your financial goals and wishes, you can answer this question quite easily.

Further Reading:
Consolidate: Why Having Multiple Financial Advisors Isn’t Better than One by Signet Financial Management

2. Decide between commission and fee

As stated earlier, there are significant differences between these types of compensation. Your best choice depends mainly on what you are trying to achieve financially, as well as where you want your investments to go in the future.

Further Reading:
Is Your Financial Advisor a Fiduciary? (And Why You Should Care) by John F. Henek (Quantum Capital Investments)

3. Do your research

Since you’ll be putting your entire financial structure in their hands, you need to make sure that your financial advisor is reliable and experienced. These facts can be easily checked online, and one of the main guidelines you shouldn’t miss is the type of licensing they hold.

4. Set up a meeting

Before you make a lasting and impactful decision, you should get to know your potential financial advisor. During the meeting, you can ask them the burning questions about what they do and how they do it, as well as learn more about their knowledge and skills.

Further Reading:
How to Find the Best Financial Advisor for You by BSW Wealth Partners

Common Misconceptions

While the area of financial advising is so advanced in the US that each person there has their own hairdresser, therapist, and financial advisor, things are quite different in other parts of the world. There is still a lot of misleading information and statements about them, and here are the most common ones.

“I don’t need a financial advisor.

A lot of people think that having a financial advisor is not at all beneficial. For them, advisors represent a source of extra costs. However, they are disregarding the positive effect a financial advisor could have on their financial future in all areas—from investing and saving to tax plans and insurance.

Retirement is still so far away.

Others tend to think about their finances only in the short-term, which is one of the most dangerous mistakes you can make when it comes to your funds. They believe that financial advisors and their expertise can only serve them for their retirement plans but not for other areas of their personal economic state.

I am not wealthy enough to have a financial advisor.

Perhaps the most common misconception about financial advisors is, they are only helping the wealthy to become more powerful and richer as time passes. However, financial advisors are actually a lot more equipped to work with average funds than several million-dollar estates, as the experience today is proving us.

Closing Notes

The area of financial advising is beneficial, not only for the individual clients but also for the companies. While having a financial advisor used to be a sign of wealth and great advantage, everyone can enjoy this benefit today. Financial advisors are able to touch all areas of finance in order to construct a useful and functioning financial plan for the future.

Our References and Further Readings

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