What Type of Financial Advisor Is Right for You?

Quick Answer

The right type of financial advisor for you depends on what your financial goals are and what the advisor specializes in. You can choose from a financial planner, investment advisor, wealth manager, tax advisor or estate planner.

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Financial advisors can provide valuable insight and guidance in all aspects of your financial life, but not all advisors are created equal. While some focus on specific areas of your financial plan, others take a more holistic approach to money and wealth management.

If you're thinking of hiring a financial advisor, here's what you need to know about the different options that are available and which one might be the right fit for you and your financial goals.

Types of Financial Advisors

Here's a quick summary of the different kinds of financial advisors that are out there and what they can do for you.

Financial Planner

  • What they do: A financial planner can provide a comprehensive financial plan for you and your family. That can help you with plans for retirement, education, your estate, insurance needs, budgeting, paying down debt and more.
  • Who they're best for: A financial planner can be a good fit for you if you want help in every aspect of your financial life. If you do work with one, consider choosing one with the certified financial planner (CFP) designation.
  • How they're paid: Many financial planners work on a fee-based system, which means you only pay for their time. This can be an hourly fee, which can range from $200 to $400, a flat per-plan fee of $1,000 to $3,000 or an annual retainer, which can be quite costly. In other cases, financial planners may also make money via commissions on the financial products they sell you or on trades if they're managing your investments. Alternatively, they may charge you a fee based on your assets under management, which can range from 0.5% to 1% of your investment portfolio balance.

Investment Advisor

  • What they do: An investment advisor or registered investment advisory (RIA) is an individual or firm that provides advice and assistance specifically for your investment portfolio. Investment advisors can manage your investment portfolio on your behalf or with your participation.
  • Who they're best for: Investment advisors can be a good fit for consumers who just want help managing their retirement or other investment accounts.
  • How they get paid: Investment advisors typically charge an annual fee based on your assets under management. The average fee is roughly 1%.

Wealth Manager

  • What they do: While an investment advisor may work with both high- and low-net worth clients, wealth managers typically only work with individuals who have hundreds of thousands or even millions of dollars worth of investment assets.
  • Who they're best for: You may consider hiring a wealth manager if you've already amassed a significant amount of wealth and want to ensure that it's managed properly.
  • How they get paid: Like investment advisors, wealth managers often charge a percentage of your assets under management—1% is common—though actual fees can vary from firm to firm, and they can go down as your portfolio grows.

Tax Advisor

  • What they do: A tax advisor can be someone who prepares your annual tax returns or someone you can consult with as needed. Tax advisors are typically well-versed in federal and state tax laws and often carry designations like certified public accountant (CPA) or enrolled agent (EA).
  • Who they're best for: Consult with a tax advisor if you only need assistance with a specific tax situation or ongoing tax preparation and guidance.
  • How they get paid: Tax advisors may charge you a flat fee for tax preparation or an annual retainer. Fees can vary greatly depending on how complicated your tax situation is.

Estate Planner

  • What they do: A financial planner can help you outline what to have in your estate plan, but you'll want to work with an estate planning attorney—or at least an estate planner who has access to an attorney—to actually set up a will or a trust.
  • Who they're best for: Work with an estate planner if you want to make decisions about what you want to happen with your assets when you die, as well as for things like end-of-life care and power of attorney in the event that you're incapable of making your own decisions.
  • How they get paid: Estate planning attorneys typically charge a flat fee. Most plans cost between $500 and $3,000, but the fees can climb into the tens of thousands of dollars for particularly complex estate plans.

Do You Need a Financial Advisor?

There's no one-size-fits-all answer to whether you need a financial advisor. If your situation is relatively simple and straightforward and you don't have a lot of assets to manage, you may be able to do everything on your own and with the help of tax preparation software, your 401(k) planning tools, budgeting apps and similar resources.

But if your situation is getting to the point where it's difficult to manage on your own, or if you want expert guidance and assistance on some of the topics described above, it might be worth it to consult with a financial advisor to get an idea of the best path forward.

How to Find a Financial Advisor

Financial advisors are in no short supply, so it should be relatively easy to find one with a quick internet search. That said, some advisors are more capable than others, and it's important that you work with a professional who is a fiduciary—meaning they put your interests ahead of their own—and has experience and possibly even credentials.

Take your time to shop around and vet multiple advisors before picking one. You may even consider asking for recommendations from your circle of family members and friends.

The most important thing is that you choose to work with an advisor that fits your needs and goals and is someone you can trust.

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