What to look for before you meet with anyone

A reputable financial advisor has credentials you can verify, discloses how they make money, and puts your interests ahead of their own commission. Before you schedule a meeting, you should know whether they are a fiduciary — someone legally required to act in your best interest — or a broker who can recommend products that pay them more. You should also know what licenses they hold and whether they have a history of complaints or disciplinary action.

The difference between a fiduciary and a non-fiduciary advisor matters because it changes what they can recommend. A fiduciary financial planner must choose investments based on what is best for you, even if a different product would earn them a larger fee. A broker or insurance agent may be required only to recommend products that are "suitable" for you, which is a lower standard. Many advisors hold both roles depending on what service they are providing on any given day, so you need to ask which hat they are wearing when you work with them.

Start by checking the advisor's background through the Financial Industry Regulatory Authority (FINRA) BrokerCheck database at brokercheck.finra.org. This is free and public. You can search by name or firm and see licenses, employment history, and any complaints or disciplinary actions. If an advisor refuses to give you their CRD number (a unique identifier in the system), that is a warning sign.

Key Takeaways

  • Verify that an advisor is a fiduciary for the services you need, and confirm this in writing before you pay them anything.
  • Check FINRA BrokerCheck and your state's securities regulator to see an advisor's licenses, employment history, and any complaints against them.
  • Understand how the advisor makes money — whether they charge a flat fee, an hourly rate, a percentage of assets under management, or commissions on products they sell.
  • Ask for references from clients with situations similar to yours, and contact at least two of them before you hire anyone.
  • Get a written agreement that spells out what services you will receive, what it will cost, and what happens if you want to end the relationship.

How financial advisors get paid, and why it matters

The way an advisor is paid directly affects what they recommend. There are four main payment models: fee-only, fee-based, commission-based, and salary-based. Understanding which one you are dealing with helps you spot conflicts of interest.

Fee-only advisors charge you directly — either a flat fee, an hourly rate, or a percentage of the assets they manage for you (called AUM, or assets under management). They do not earn commissions on products they recommend. This model has the fewest built-in conflicts because the advisor's income does not depend on steering you toward expensive or unnecessary products. Fee-only advisors are more likely to be fiduciaries, though you should still confirm this in writing.

Fee-based advisors charge you a fee and also earn commissions on some products. This creates a potential conflict: they might recommend a product partly because it pays them a commission. Ask them to disclose all sources of income and to explain in writing why they recommend each product.

Commission-based advisors earn money only when you buy a product they recommend — insurance, mutual funds, annuities, or stocks. They do not charge you a separate fee. The risk here is that they may recommend products you do not need or recommend expensive versions of products you do need, because their income depends on the sale. Commission-based advisors are often not fiduciaries.

Salary-based advisors work for a bank, brokerage, or financial institution and earn a salary regardless of what they recommend. They may still have incentives to sell certain products, so ask about this directly.

Credentials and licenses to verify

Not all credentials mean the same thing. Some require rigorous testing and continuing education; others do not. Here are the ones that carry real weight:

Certified Financial Planner (CFP) requires passing a comprehensive exam, meeting education and experience requirements, and completing continuing education every two years. CFPs must act as fiduciaries when providing financial planning services. This is one of the most respected credentials in the industry.

Chartered Financial Consultant (ChFC) is similar to CFP but requires more coursework and less exam-based testing. ChFCs must also act as fiduciaries when providing financial planning advice.

Registered Investment Advisor (RIA) means the advisor is registered with the Securities and Exchange Commission (SEC) or your state's securities regulator. RIAs must act as fiduciaries. You can verify RIA status through the SEC's Investment Advisor Public Disclosure database at adviserinfo.sec.gov.

Series 7 or Series 65 licenses mean the advisor has passed exams required to sell securities or manage investments. These are necessary but not sufficient — they do not may provide the advisor is a fiduciary or has your best interests in mind.

Credentials like "financial advisor," "wealth manager," or "investment specialist" are not regulated and do not require any specific training or exam. Anyone can use these titles. Always ask what credentials an advisor holds and verify them through FINRA BrokerCheck or the SEC database.

Red flags that suggest you should look elsewhere

Certain behaviors or statements should make you walk away. If an advisor guarantees returns, promises you will beat the market, or says they have a secret strategy, they are either lying or they do not understand investing. Markets go up and down, and no one can predict them consistently.

If an advisor refuses to disclose how they make money, will not put their recommendations in writing, or will not provide references, do not work with them. Reputable advisors are transparent about fees and happy to provide documentation. If they push you to make a decision quickly or pressure you to move money immediately, that is a sign they are more interested in a commission than in your situation.

If an advisor has a history of complaints in FINRA BrokerCheck or has been disciplined by a regulator, ask them directly about it and listen carefully to their explanation. One old complaint may not be disqualifying, but a pattern of complaints or a recent disciplinary action is a reason to keep looking.

Be wary of advisors who focus only on selling one type of product — annuities, life insurance, or mutual funds from a single company. A good advisor considers your whole situation and recommends a mix of products based on your needs, not their commission.

How to check an advisor's background and history

Start with FINRA BrokerCheck at brokercheck.finra.org. Enter the advisor's name or their firm's name. You will see their current and past licenses, employment history, and any customer complaints, arbitrations, or disciplinary actions. Read the details of any complaints — some are minor and some are serious.

If the advisor is registered with the SEC as an RIA, check the Investment Advisor Public Disclosure database at adviserinfo.sec.gov. This shows their registration status, the services they offer, and their fee structure. You can also download their Form ADV, which is a detailed disclosure document that includes information about their business, their fees, and any conflicts of interest.

Check your state's securities regulator. Most states have a securities division within the Attorney General's office or a separate securities commission. Search their website for the advisor's name to see if they are registered in your state and whether there are any complaints or disciplinary actions on file.

Search the advisor's name online along with words like "complaint," "lawsuit," or "fraud." This is not a substitute for official databases, but it can surface public information that might not appear in regulatory filings.

Questions to ask before you hire an advisor

Schedule a consultation — most advisors offer an initial meeting for free. Come prepared with these questions and take notes on their answers:

  • Are you a fiduciary all the time, or only when providing certain services? Get the answer in writing. "All the time" is the best answer.
  • How do you make money? Ask them to explain their fee structure in detail and to disclose all sources of income, including commissions.
  • What licenses and credentials do you hold? Ask for their CRD number and verify it in FINRA BrokerCheck.
  • What is your investment philosophy? Listen for whether they talk about your goals and risk tolerance, or whether they push a particular strategy.
  • Can you provide references from clients in a situation similar to mine? Ask for at least two and contact them.
  • What services do you provide, and what do they cost? Get a written estimate before you commit.
  • How often will we meet, and how will you communicate with me? Understand what ongoing service looks like.
  • What happens if I want to end our relationship? Ask about exit fees or penalties.

What to do after you hire an advisor

Get everything in writing. Your advisor should provide a written agreement that spells out the services they will provide, what you will pay, how often you will meet, and what happens if you end the relationship. Read this carefully and ask questions about anything you do not understand.

Review your account statements regularly — at least quarterly. Make sure the investments match what you and your advisor discussed. If your advisor makes changes without explaining them, ask why. You should understand every investment in your portfolio.

Stay in touch with your advisor about changes in your life — a job loss, inheritance, marriage, or health issue. Your financial plan should change as your situation changes. If your advisor does not ask about these things or does not adjust your plan, that is a sign they are not paying attention.

If you become uncomfortable with your advisor for any reason, you can switch. There is no penalty for ending the relationship, though you may owe a final fee if you are charged hourly or a flat rate. Do not stay with an advisor you do not trust.

Frequently Asked Questions

What is the difference between a financial advisor and a financial planner?

These terms are often used interchangeably, but "financial planner" usually means someone who creates a comprehensive plan covering your whole financial life — retirement, taxes, insurance, investments, and estate planning. A "financial advisor" may focus on just one area, like investments. Ask what services each person offers rather than relying on the title.

Do I need a financial advisor if I have a 401(k) through my employer?

A 401(k) is a start, but it may not be enough. An advisor can help you decide how much to contribute, how to invest the money, what to do with it when you leave your job, and how it fits into your overall plan. Whether you need an advisor depends on your situation — if your finances are simple and you are comfortable making decisions on your own, you may not need one.

How much should I expect to pay a financial advisor?

Fee-only advisors typically charge between 0.5% and 2% of assets under management per year, or $1,000 to $5,000 per year for a flat fee, or $150 to $400 per hour. Commission-based advisors charge nothing upfront but earn a percentage of products you buy. Ask for a written estimate of total costs before you hire anyone.

Can I fire my financial advisor if I am not happy?

Yes. You can end the relationship at any time. You may owe a final fee depending on how they charge, but there is no legal penalty for switching advisors. If you want to move your investments to a new advisor, ask your current advisor about the process — they should help you transfer your accounts.

What should I do if I think my advisor is acting unethically?

File a complaint with FINRA at finra.org/investors/file-complaint or with your state's securities regulator. You can also file a complaint with the SEC at sec.gov/complaint. Provide as much detail as possible about what happened and when. These agencies investigate complaints and can take action against advisors who violate rules.