Many individuals hesitate to engage a financial advisor because they believe they don’t have enough assets. Historically, this concern was valid. Advisors often prioritized high-net-worth clients due to steep minimum asset requirements. While this approach remains common, more advisors today are embracing innovative service models to efficiently support clients with smaller portfolios.
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Whether you’re managing student loan debt, exploring early financial independence, planning to launch a business with an inheritance or preparing for life milestones like marriage or buying a home, professional financial guidance can be a game-changer. In fact, early planning often leads to the most significant long-term impact.
As an up-and-coming investor, here’s what to consider when choosing a financial advisor:
— What will a financial advisor cost?
— Are there other fees I should expect?
— What services do I really need?
— Does working with a fiduciary mean better advice?
— How do I find an advisor who’s a good fit?
— What else should I think about when choosing an advisor?
— What questions should I ask a prospective advisor?
What Will a Financial Advisor Cost?
Many advisors — especially fee-based and robo platforms — charge based on a percentage of the assets they manage for you. However, as the industry evolves to serve a broader range of clients, many now offer flat-fee, project-based or hourly pricing options as well.
Assets Under Management (AUM)
With the AUM model, fees are calculated as a percentage of your managed assets and are automatically deducted from your account. The typical AUM fee averages just over 1%, but smaller accounts may pay higher rates, often as much as 2% annually. These fees generally decrease as your account grows. For example, with a 1.5% AUM fee on $150,000, you’d pay $2,250 annually. Advisors usually adjust AUM fees periodically to reflect account value changes.
Flat Fees (Project-Based or Hourly)
Flat fees are increasingly appealing to smaller investors seeking predictability and control.
These fees are often based on the type and complexity of the service:
— Stand-alone financial plans: $1,000 to $3,000
— Annual retainers: Up to $7,500
— Hourly consultations: $200 to $400 per hour
Always ask advisors to clearly explain their pricing. Fee structures — whether AUM, flat-rate or hybrid — must be disclosed in the advisor’s Uniform Application for Investment Advisor Registration, commonly referred to as Form ADV.
A trustworthy advisor will be transparent, sharing not just percentages but actual dollar amounts. Regardless of the advisor’s reputation, it’s important to review your account statements regularly to confirm all charges match what was disclosed. Mistakes can occur.
Other Compensation Models
— Commissions. Some advisors earn commissions from product providers instead of billing you directly. These fees are embedded in the product’s cost.
— Hybrid fees. Some advisors have the flexibility to charge fees to some clients and receive commissions from others. However, they cannot collect both a fee and commission on the same product recommendation. These advisors must take extra care to clearly explain their compensation structure so that you always know who is paying for their services and how those payments might influence their recommendations.
Are There Other Fees I Should Expect?
Beyond advisor fees, investment products often carry their own internal costs — commonly referred to as expense ratios
. These fees cover the operational costs of mutual funds, exchange-traded funds or other products and are disclosed in your account paperwork. A client is not paying twice for the same benefit; rather, they are paying all parties to the transaction.
Product fees are added to the advisor’s fee to determine the total fee. For example, you may pay a 1% advisor fee and a 1.5% product fee, for a 2.5% total fee. The advisor’s fee is payable for as long as the client has a relationship with the advisory firm. The investment product fee is only payable for the period that the client has the product in their portfolio.
What Services Do I Really Need?
Even if your account is small, you still deserve thoughtful, comprehensive service. Most early-stage investors benefit from a foundational financial plan that includes goal-setting, budgeting, debt strategies and investment guidance. Ongoing support for major milestones — such as purchasing a home or managing student loans — can also be critical.
Keep in mind that some advisors bundle these services into their overall fee, while others charge separately.
Does Working With a Fiduciary Mean Better Advice?
A fiduciary is legally required to act in your best interest, and that standard demands that all conflicts of interest between the advisor and client be eliminated or fully disclosed. While this may sound like a gold standard, both fiduciaries and non-fiduciaries can provide excellent service depending on their compensation models and ethical standards. A high-profile court case underscores the uncertainty many investors experience in understanding what is required of different classifications of financial advisors.
The recent Retirement Security Rule, introduced by the U.S. Department of Labor in April 2024 and known broadly as the DOL Rule, reignited the debate over fiduciary standards. If passed, it would have required all retirement advisors to follow fiduciary guidelines, aiming to protect clients from excessive fees. While the proposal reflected a broader effort toward fee transparency, it also faced legal pushback, as similar proposals have under both the Obama and the first Trump administrations.
As of this writing, the current version stalled before the end of the Biden administration and has not been picked up again so far in the second Trump administration.
What is important for investors to know is that at the core of these proposals lies a debate within the financial services industry about compensation transparency. One faction assumes that all commissioned sales inherently create conflicts of interest. However, even non-fiduciary advisors are held to strict regulatory standards of conduct. While fiduciary advisors are required to prioritize their clients’ best interests, this standard has its own limitations:
— Fiduciary standards are not foolproof. Even fiduciary advisors can engage in misconduct. For example, Bernie Madoff operated the largest Ponzi scheme in history, defrauding investors of $64.8 billion over 17 years, despite being a fiduciary who was trusted by both clients and regulators.
— Fiduciary standards are not free from conflicts. Under the AUM fee model, advisors earn more as client assets grow and less when assets decline. This structure could discourage advisors from recommending large purchases or insurance solutions that might reduce managed assets. Additionally, during market downturns, advisors may face increased client demands just as their income decreases.
Client confidence in their advisors is essential for the health of the financial industry. While stronger regulations aim to protect consumers, they will not deter unethical advisors who already neglect client interests. Instead, heightened compliance requirements may make it harder to attract and retain quality advisors, increasing costs for clients and potentially creating new obstacles for smaller investors to access professional advice.
Simply focusing on whether an advisor is a fiduciary does not guarantee better outcomes. Fiduciary and non-fiduciary advisors can offer similar advice. Ultimately, what matters most is how the advisor explains their compensation and aligns their recommendations with your personal goals — not just whether they are a fiduciary.
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How Do I Find an Advisor Who’s a Good Fit?
In the digital age, geography no longer matters. As long as an advisor is licensed in your state, they can serve you by video from anywhere in the U.S. Instead of choosing the closest advisor, you can find one that best matches your needs by experience, niche market and expertise, gender, languages spoken and other criteria.
Tap Your network
Hearing firsthand from someone you know and trust about how an advisor communicates and responds to messages can be invaluable. Your accountant, attorney, insurance agent and even your mortgage broker routinely network with financial advisors. These referrals are especially valuable because they already understand your financial situation and whether your personalities will mesh. You also may get better service overall because your accountant and financial advisor become a cohesive team.
Use an Online Advisor Search
These databases include financial advisors who work with smaller clients and often cater to younger generations. Most advisors on these platforms trend to AUM or flat-fee compensation schedules.
— U.S. News & World Report. Filter advisors by location and firm name. The database also provides details on specialties and experience.
— National Association of Personal Financial Advisors (NAPFA).
— XY Planning Network (XYPN). Specializes in younger, Generation X through Y investors.
— Savvy Ladies. Specializes in working with women investors.
— The CFP Board. This network lists all certified financial planners nationwide, several of whom offer low-cost or sliding-scale services.
Match Online With an Advisor
You can go online to find many free services that connect financial advisors directly with new clients. While an internet search for “financial advisor near me” will bring innumerable options, the downside is that your information will likely go to multiple advisors. If you prefer a fee-only advisor, include the word “fiduciary” in your search terms.
Local Services
Your local credit union or community development financial institution often offer financial counseling, savings programs and credit building services that can better prepare you for working with professional financial advisors. They are also a wonderful source of financial literacy educational gatherings. An online search can help you find the branch closest to you.
Consider a Robo Advisor
Digital platforms from major banks and brokerages offer automated portfolio management at competitive rates. While lower in cost for basic services, more personalized features often come at a premium.
What Else Should I Think About When Choosing an Advisor?
The U.S. Bureau of Labor Statistics recorded 321,000 financial advisors in 2023, a daunting number to winnow down to find the right advisor for you. Keep these considerations in mind:
Firm Size
Financial advisors can be a solo operation, a small boutique practice or associated with a practice consolidator, resulting in a much larger firm footprint overall. Larger firms
may offer a broader range of services and have some economies of scale. However, smaller firms may be able to offer a higher degree of personalization and familiarity that is comforting to a newer investor.
Credentials and Expertise
Professional designations signal that an advisor has completed advanced education and passed challenging exams in various specialties, including ethics.
Niche Market
Many advisors are willing to dive deep into a smaller pool of clients to provide highly customized services. Niche practices can be managed profitably, enabling them to focus more on the individual, rather than the account size.
Online Presence
Websites and social media profiles can tell you a lot about an advisor. Does the website tell a positive story of the advisor’s investment philosophies, firm values, and the team’s background and experience? A current profile picture and engaging content builds rapport and trust. Your financial relationship with an advisor is as intimate as your relationship with your doctor, so understanding them as an entire being is invaluable to building an enduring relationship together.
Demographics
The field is diversifying, and you may prefer an advisor who shares your background, gender or understands your lived experiences.
Regulatory Record
Check the Securities and Exchange Commission’s Investment Advisor Public Disclosure and the Financial Industry Regulatory Authority’s BrokerCheck for a financial advisor’s disciplinary history, bankruptcies or other red flags.
What Questions Should I Ask a Prospective Advisor?
A good advisor will take time to answer your questions clearly and without jargon. While most of the information will be in Form ADV, these key questions will help you assess fit:
— What types of clients do you typically serve?
— How do you support clients with smaller accounts?
— Do you have a niche or any special expertise?
— How often will we meet? What communication can I expect?
— How much will I pay in actual dollars?
— Are you a fiduciary? Do you ever receive commissions? If yes, how will you differentiate commissions and fees?
— Will I work directly with you or with another team member?
— Can you bring in other professionals to help with taxes, insurance or estate planning?
— Will the person who referred me receive compensation?
Lastly, ask, “Am I a good fit for your practice?” A confident advisor will be honest about whether your needs align with their business model.
Takeaway
No matter your current financial picture, professional advice is within reach. By asking thoughtful questions and understanding your options, you can choose a financial advisor who supports your goals — both now and in the future.
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How to Find a Financial Advisor If You’re Not Rich originally appeared on usnews.com
Update 05/14/25: This story was published at an earlier date and has been updated with new information.
