You Don’t Have to be Rich to Hire a Financial Advisor

When looking for a financial professional who can guide you toward a comfortable retirement, the size of your investment account may not matter. 

A growing number of financial advisors across the country have abandoned lofty net worth requirements to focus on serving individuals with average incomes and families coping with credit card debt and paying off student loans.

The Way You Pay Financial Advisors Is Changing

One of the primary reasons it’s historically been difficult for a typical household to afford a financial advisor was their incentive structure. 

Traditionally, stockbrokers and financial advisors earned their income based on the scale of the business they conduct. For instance, many received commissions on stock trades or a fee based on a percentage of the client’s assets they manage.

Under these fee arrangements, high-net-worth investors and institutional clients generate considerably more income for advisors than everyday Americans. As such, it made it hard for advisors to prioritize the latter or even make room for them as clients.

This traditional payment model poses a potential risk to ordinary investors. Andrew Dressel, a financial planning expert from Abundo Wealth, explains: “Traditional financial advisors use financial advice to drive to certain outcomes or products that they receive a benefit or compensation from. On the other hand, the scope of the relationship with an advice-only advisor is based on the depth and breadth of the advice that you get.”

The emergence of “advice-only” advisors provides an affordable option for investors who value professional guidance but choose to implement recommendations on their own. This contrasts considerably with commission-based planners and brokers who face significant conflicts of interest in their suggestions. 

Commission-based compensation structures also risk incentivizing advisors to put their own interests ahead of their clients’ financial well-being. In the worst cases, they can operate more like salespeople than coaches.

Therefore, finding the right advisor, particularly for ordinary Americans, starts with knowing what type of advisor to look for and compensation arrangements that won’t break the bank.

How to Find an Affordable Financial Advisor

There are several ways to compare different types of advisors, including their compensation structure. If you struggle to find someone who will work enthusiastically with you, this comparison is crucial.

Instead of traditional models like commission-based pay, many individuals and couples prefer advice-only financial planners or advisors who charge hourly rates for their services. 

Financial expert advisor Eric Simonson, also of Abundo Wealth, offers some of the reasoning behind this shift: “Every advisor is going to be a little unique in terms of their service offering, but on the whole, you can expect advice-only advisors to be much more comprehensive with their advice since their income is in no way tied to the advice they provide. So, they are really free to ‘go anywhere’ with their guidance/advice.”

Paying financial advisors strictly for their time and services, rather than product sales or investment returns, simplifies matters. It levels the playing field for investors with modest portfolios and drastically reduces the risk of conflicts of interest.

There are many ways to find advisors like these, but platforms like the Advice Only Network and XY Planning Network help to connect investors with the right professionals and streamline the process. 

The cost of hiring a financial advisor can vary significantly based on the type of advisor you hire and the services they provide. For instance, AUM-based providers commonly charge a 1% fee on assets within their care.

Among advisors that charge hourly or flat fees, the rate will depend on factors like their experience level, track record, and competition in the local area.

An experienced financial advisor who prioritizes your best interest will always be worth the cost. Even so, it is essential to understand what that cost is and how it works before committing your portfolio to an advisor or firm.

Even after filtering your advisor search to those who charge portfolio-agnostic rates, asking financial advisors about those rates before working with them is still good practice. Knowing how they calculate their fees and what you can expect to pay will allow you to confidently put your financial future into safe, experienced, and affordable hands.

Financial Advice for the Rest of Us

Whether you have $100 or $1 million to invest, many financial advisors will be enthusiastic champions of your financial success. Although not every financial advisor specializes in serving everyday investors and families, countless top-tier professionals do.

Knowing what type of advisor you need, how their pay structure works, and the clients they typically work with is the first step to narrowing your search. From there, you are on the way to finding a local financial advisor with the demeanor, skills, and experience to help you build a nest egg to enjoy your golden years.

Find a Financial Advisor

Do you have questions about your financial future? Find a financial advisor who can help you enjoy life with less money stress by visiting Wealthtender’s free advisor directory.

Whether you’re looking for a specialist advisor who can meet with you online, or you prefer to find a nearby financial planner, you deserve to work with a professional who understands your unique circumstances.

Have a question to ask a financial advisor? Submit your question and it may be answered by a Wealthtender community financial advisor in an upcoming article.

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This article originally appeared on Wealthtender. To make Wealthtender free for our readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a natural conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.