How to Find a Financial Advisor if You’re Not Rich

Types of Financial Advisors

"Financial advisor" is an umbrella term that includes a number of different types of financial professionals. A financial advisor's designation tells you the specifics of their education and specialization. Here are the main types of financial advisors:

• Certified financial planner (CFP): CFPs help clients with all areas of their finances by creating a comprehensive financial plan. For example, they can help you accomplish goals like saving for a home, choosing life insurance or determining a retirement investing strategy.
• Chartered financial analyst (CFA): In contrast to a comprehensive financial planner, a CFA takes a more narrow approach, focusing on providing investment advice and portfolio management.
• Registered investment advisor (RIA): An RIA is a financial advisor with a fiduciary obligation, meaning they're legally required to act in your best interest. RIAs often offer financial advice in a range of areas, including investing for retirement and estate planning.

Pros and Cons of Hiring a Financial Advisor

There are certain situations in which hiring a financial advisor makes sense, and others where an advisor may not be worth the price. Before you work with a financial advisor, consider some of the pros and cons.

Pros of Hiring a Financial Advisor

• Holistic financial plan: Working with a financial advisor, especially a CFP or another professional who specializes in comprehensive planning, can help you organize your full financial picture to create a budget, set and achieve financial goals and manage and pay off debt.
• Retirement planning help: If you're nearing retirement or want to make sure that your retirement investing is on the right track, an advisor can help you assess your goals, balance your portfolio and set up a plan for how you'll ensure a steady stream of income after you retire.
• Boosted investing confidence: You don't necessarily need a financial advisor to begin investing, but tapping into a financial advisor for professional asset allocation advice can increase your confidence and help you invest wisely—and potentially boost your returns by 3% in a given year, according to Vanguard.

Cons of Hiring a Financial Advisor

• Costs and fees: Financial advising can be expensive. For instance, an annual retainer fee for a financial advisor could be between $1,000 and $5,000. An hourly rate for an advisor could range from $100 to $400 per hour.
• Conflicts of interest: If you work with a non-fiduciary advisor, they may advise you to buy investments that aren't best for you but pay the advisor a higher commission.
• Not always necessary: You may not need an advisor at all, especially if your financial situation isn't complicated or if your money concerns are better suited to a different financial professional, such as a credit counselor or financial counselor (more on this below). If a financial advisor isn't your best option, then working with one can create an unnecessary expense.

How to Find Cheap or Free Financial Advising

If you want to work with a financial advisor and have a limited budget, you have options.

Whether you need comprehensive financial planning or help choosing investments, consider working with a financial planning organization whose members offer fee-only advising. Fee-based advisors might charge an hourly rate, a monthly subscription fee or a flat plan fee, and they often don't have a minimum asset requirement. This can make it easier to find a financial planner that fits your budget.

These organizations can help you connect with a fee-based financial advisor:

• The National Association of Personal Financial Advisors (NAPFA) is a leading association of fee-only certified financial planners who offer comprehensive financial planning. NAPFA members help clients with all areas of financial life, like creating a budget and saving toward major financial goals, creating an emergency fund, planning for retirement and evaluating what size mortgage you can afford. NAPFA's advisor search tool isn't specifically tailored to consumers with specific income ranges, so search results can turn up a range of cost and affordability.
• The XY Planning Network (XYPN) is an organization of fee-only fiduciary advisors who specialize in comprehensive financial advising for Generation X and millennial (also called Generation Y) clients. All XYPN advisors offer services through a monthly retainer model—like a subscription plan for financial advising. They don't use minimum asset requirements.
• The Garrett Planning Network is a fee-only fiduciary advisor organization focused on lowering barriers to advising by not using minimum asset requirements and charging on an hourly, as-needed basis. Garrett Planning Network advisors offer comprehensive financial planning as well as investment advising. Rates are typically between $150 and $350 an hour.

Some consumers may also be able to find short-term financial planning and advice for free, or pro bono. The Financial Planning Association (FPA) hosts a list of pro bono planners by state for financially vulnerable clients impacted by COVID-19. You can also try locating free financial advising near you by searching for "pro bono financial planners" in your state or city.

Lastly, the Foundation for Financial Planning (FFP) is a nonprofit firm that funds pro bono financial advising through grants. Their Consumer Resources site lists financial resources for consumers seeking financial advice, including information on finding pro bono financial planning for financially vulnerable clients, including "wounded veterans, domestic violence survivors, struggling single parents and people with cancer."

Low-Cost Alternatives to a Financial Advisor

Even with diverse advising billing models, which may make financial advising more accessible to middle-class households, it still may not be cost-effective to hire an advisor.

Consider these low-cost alternatives:

Invest With Robo-Advising

The average investor can do well building their retirement fund using a 401(k) or IRA, but what about when they exhaust retirement plan contributions or want to try shorter-term investing?

Automated portfolio management, or robo-advising, uses algorithms to design and automatically rebalance your portfolio based on your goals and risk tolerance. Popular investment firms such as Fidelity, Schwab and Vanguard offer robo-advising, often with no or low fees and approachable portfolio balance requirements.

Take a Finance Course

Taking a personal finance class can increase your confidence, financial literacy and money management skills.

Your local community college may offer affordable personal finance courses on fundamental topics like creating a budget, managing credit responsibly, making good investment decisions and buying a home. There's also a host of educational resources online from sites like Udemy and Khan Academy.

Even personal finance books like "Get Good With Money," "I Will Teach You to Be Rich," "The Simple Path to Wealth" and more can serve as crash courses in improving your financial picture.

Seek Financial Counseling

Financial counselors offer free or low-cost services geared toward helping lower-income clients with money management. For example, a financial counselor can help you create a budget, create saving plans, claim tax credits you qualify for and set financial goals.

Financial counselors aren't usually a good fit for people who want help selecting investments. You can find a certified financial counselor through the Association for Financial Counseling & Planning Education.

Seek Credit Counseling

If managing debt is your top financial concern, working with a credit counselor might help. Credit counselors can help you create a budget, commit to a debt repayment plan and, in some cases, lower your monthly debt payments.

The National Foundation for Credit Counseling and the Financial Counseling Association of America can help you find a reputable counselor to work with.