Here’s how to choose the right financial advisor for you

If you’re remodeling your kitchen, you probably turn to a licensed contractor. Planning an expensive European vacation or Hawaiian honeymoon? You may very well have a travel agent handle the booking.

So, why, when planning your financial future, wouldn’t you seek out professional help?

It’s common sense. Yet only 17% of Americans avail themselves of a financial advisor, the 2019 Invest in You Savings Survey from CNBC and Acorns found — and 75% handle their money themselves.

Picking the right financial professional can take some homework — you’ll want to do your due diligence in terms of research, but also meet up (in person or online) with a potential planner, too. CNBC can help, with its third annual FA 100 list of the nation’s top financial advisory firms.

“Choosing a financial planner is one of the most important financial decisions you will make,” said John Loper, a certified financial planner and managing director, professional practice, at the CFP Board. “This decision takes some research, but partnering with the right financial planner can provide confidence today and a more secure tomorrow.”

More from FA 100:
FA 100: CNBC ranks the top-rated advisory firms of 2021
How the pandemic has changed the financial advice business
Here’s how top financial advisors are hiring young talent

First, you’ll have to wade through a thesaurus’ worth of titles and terminology.

Think you need a “financial advisor”? Well, there are financial advisors, and then there are fee-only financial advisors, fee-based advisors, hybrid advisors and dually registered ones not to mention the alphabet soup of advisor certification acronyms, such as CFP, which stands for certified financial planner, and ChFC, or chartered financial consultant.

Here’s a brief look at some of the types of financial advisor you might encounter:

• Financial advisor: This is a generic, catch-all term for financial planners who provide money-related advice in exchange for compensation. Advisors offer an array of services, from investment management and estate planning to income-tax preparation. They generally must be licensed in order to conduct business with the public.
  Financial advisors may go by various titles, including wealth manager, investment advisor and financial consultant. Some advisors may be stockbrokers, insurance agents, estate planners and bankers, as well, among other professions.
• Fee-based financial planner: This is an advisor whose income is based on a combination of commissions on financial products they sell and fees for financial planning.
• Fee-only financial planner: An advisor whose earnings come from direct fees to clients, rather than commissions or other sources. They may charge by the hour or with flat fees.
• Hybrid advisor: This advisor has passed the General Securities Representative Exam; has a separate license to give financial-planning advice; and owns their own registered investment advisory (RIA) firm registered with the Securities…