Do You Need a Financial Advisor? How to Know If It’s Time

I've considered hiring a financial advisor a few times. I took the plunge when my husband and I were expecting our first child, and I wanted someone to look over my shoulder and tell me what I was forgetting. A couple of meetings with a certified financial planner and some before-baby homework were all I needed.

Four years later, I'm thinking about it again. We moved, and our household finances changed in ways we didn't fully plan for. We're on solid footing, but we have more goals than time and energy to devote to them. There are things I want another opinion on — and things I may want off my plate entirely.

That’s what covering financial advising has taught me: The answer changes because your life changes. There's no income, net worth or age that dictates whether to hire a financial advisor. It’s much more about whether the problem you’re facing right now is best solved by working with a professional.

Plus, it helps to understand that it’s not a one-size-fits-all kind of industry. Even the term “financial advisor” is generic and unregulated. The people who typically use it have a wide variety of expertise and offer a range of services. You have to hunt for what you need.

You need to know the problem you're trying to solve

I think you’ll feel most confident deciding for yourself whether you need an advisor if you can get specific about what you want them to do.

Many people turn to an advisor when they’re experiencing a major life change. It’s easy to see why you’d want advice when you’re getting divorced, taking responsibility for an aging parent or receiving a large inheritance. You may want an advisor who can answer your questions, educate you about your options and help you carve a path forward while handling some or all of the technical details.

Eric Wiegand, a CFP® and senior wealth advisor with River Wealth Advisors in Allentown, Pennsylvania, says he can see when someone is ready to work with an advisor because the conversation shifts. “It goes past that feeling of, ‘What kind of investment returns can be produced,’ to, ‘Hey, I've got real issues here that … I need someone to advise me on,’” he says.

But the desire for help and advice can creep up on you, too. Your financial life starts to feel complicated, and you’re concerned you’re missing something.

Jaime Eckels, a CFP and partner at Plante Moran Wealth Management in Auburn Hills, Michigan, says she sees this happen with high earners with complex income, such as stock options or deferred compensation. For someone in that situation, an advisor’s input on tax planning may be worthwhile. “They don't really know what they don't know,” she says. “There's a lot of creative planning that could be done.”

And it’s worth noting that complexity is often time-consuming. You don’t have to feel outsmarted by your income or tax situation to want to hand off the work to someone else. “This is a very full-time commitment,” Eckels says. “Even though you're capable of doing it … carving that time out to do it, and do it well, is very hard.”

Sometimes you don't need an advisor

Once you know the problem, consider how much help you need to solve it. The right move isn’t always hiring an advisor who charges you for ongoing advice and investment management. There are other options, and some of them can open doors if you don’t have enough money invested to meet the minimums many firms set.

Some advisors, often called advice-only advisors, offer financial planning but won’t manage your investments. This is the route I took myself. The time commitment varies. Some may meet with you just long enough to develop or update your financial plan, which you can implement on your own. Others may meet with you annually or multiple times per year. It could be a good fit if you want professional advice but prefer to handle the day-to-day pieces yourself.

A robo-advisor is another option to explore if you’re primarily looking for help managing investments. Robos do that automatically, usually for a lower fee than you’d pay with a human advisor. Many advisors charge a percentage of the assets they manage. If an adviser charges a 1% fee and manages $500,000 for you, you’ll pay about $5,000 per year. Human advisors often can address more complex planning needs.

Some events may be best handled by someone else. A CPA who files your taxes could help you adjust withholding when your restricted stock units start vesting, for example. An online estate planning service or an estate planning attorney could cover the basic documents you need when you have young children.

Estate planning is mostly a formality at that stage, Wiegand says. This often includes naming guardians for children and naming life insurance beneficiaries to cover a worst-case scenario. “You don't have to go pay a partner at a large regional firm,” he says. “You can just go online.”

If you’re still not sure if you need an advisor, consider meeting with one. First consultations are often free. An advisor should tell you whether you actually need their services, Wiegand says. “It's easier for an advisor to tell when a prospective client isn't ready than for a prospective client to pull that out of thin air.”

Not all advisors will be so candid, though. Before you meet with someone, look them up to understand how they get paid, what credentials they hold and whether they have any disciplinary history. FINRA BrokerCheck, the SEC's Investment Adviser Public Disclosure website and the CFP Board's verification tool are free places to start. (We walk you through how to do that in our guide to choosing a financial advisor.) The National Association of Personal Financial Advisors (NAPFA), Garrett Planning Network and XY Planning Network can help you find advisors who charge hourly or flat fees.

You may find that you don’t need an advisor yet, and that’s OK. While I’ve said “yes” to this do-I-need-an-advisor question before, I’ve spent years between then and now content with a “no.” I’ve opted instead to rely on a budgeting app and invest in a target-date fund inside a 401(k).

Eckels says she’s advised prospective clients in similar situations to hold off on hiring an advisor. They’re often early in their careers, have most or all of their investments in an employer retirement plan and don't have much left over each month to save.

That can change as your savings grow or other decisions come into play. Eckels says it's worth reassessing regularly, “making sure that the service that you have is the right fit for where you are at that point in your financial life.”

Not sure if it’s time? Take the quiz

Our quick quiz asks questions in five areas to evaluate whether a financial advisor might be a good idea for you. The maximum score is 50 points; if you score 20 or more, it’s probably worth considering hiring one.

» Score 20 points or more? See our picks for the year’s best financial advisors