Who pays an advisor and how they charge are two different questions, and the labels the industry uses blur them. Answer both before you hire, then check what you were told against a federal register.
How advisors work
What does an advisor do?
Two jobs, sold together or separately
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Investment managementChoosing the funds and running the accountOngoing
Financial planningTax, drawdown order, insurance, estate, timingOne-off or ongoing
The title is not protected. Anyone may call themselves a financial advisor. The letters after the name are what carry a standard: CFP for planning, CPA or PFS for tax, CFA for investment analysis. Whether they are registered is a separate question again, and a matter of public record.
Who pays them?
Fee-only, fee-based, or commission
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Whether anyone other than you is paying them.
Fee-onlyThey sell advice, not productsOnly you
Fee-basedEasy to mistake for fee-onlyYou, plus commissions
CommissionOften presented as free adviceThe product seller
Fiduciary is a separate question from how they are paid. Ask whether they act as a fiduciary at all times, and get it in writing. Some advisers are fiduciaries when planning and salespeople when selling you a product, in the same meeting.
How do they charge?
Hourly, flat, retainer, or a percentage
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Priced for different jobs, not cheaper or dearer versions of each other. Figures are typical, and all four are negotiable.
HourlyOne question, or a check-in once a year$200 to $400 an hour
Flat or project feeA written plan, which you then carry out$2,000 to $5,000 a plan
RetainerOngoing access, usually no asset minimum$200 to $500 a month
Percentage of assetsAssets under management, or AUM. They run the portfolioAbout 1% a year
If they charge on assets, ask three things: where the rate tiers down, what is included at that price, and whether the funds they put you in carry their own fees on top.
What do you ask them?
Seven questions, and how to tell a real answer from a dodge
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Ask about them
Are you a fiduciary, always? Can I get that in writing?A real yes is “yes, at all times”, and it goes in writing without a pause. “I always act in my clients’ best interest” is a sentence anyone can say, including someone paid on commission. It is not the same promise.
How are you paid? What will this cost me in dollars this year?You want a number, or a rate they turn into a number in front of you. A percentage with no dollar figure attached is not an answer to the second half.
Can I hire you once, or is it ongoing only?
Does anyone other than me pay you anything? Commissions, referral fees, revenue sharing?
Ask about me
Looking at my income, assets and debts, what would you change first?
What am I missing on taxes?
What should I be asking that I’m not?
If retirement is what brought you here, three more are worth naming: the order you draw your accounts down, whether Roth conversions pay off before RMDs begin at 73, and when to claim Social Security. All three turn on your exact tax position, which is why no calculator answers them, ours included.
On the last of those, your benefit estimate from your actual earnings record is free at ssa.gov and takes five minutes. Worth having before the meeting, since our figure is an approximation of something the SSA gives you exactly.
Where to search
NAPFA · National Association of Personal Financial AdvisorsFee-only fiduciaries. Members sign a fiduciary oath annually and take no commissions of any kindSearch→
Garrett Planning NetworkFee-only, billed by the hour, no asset minimum. The shape that fits one conversation about drawdown order rather than a relationshipSearch→
XY Planning NetworkFee-only, monthly retainer, no asset minimums. Aimed at people still accumulating rather than drawing downSearch→
ACP · Alliance of Comprehensive PlannersFee-only, annual retainer, with tax planning inside the engagement rather than referred outSearch→
Let's Make a Plan · CFP BoardEvery CFP professional in the country, on every charging structure. The broadest search here, and the only one that includes fee-based advisers, so ask how each is paidSearch→
We are paid nothing by any of these and none are ranked. All are free to search.
Verify before you hire
Use both to confirm they are registered and to see any disciplinary record. Free, and a minute each.
SEC Investment Adviser Public DisclosureRegistration status and Form ADV. Part 2 states fees and conflicts in plain English, by ruleLook up→
FINRA BrokerCheckEmployment history, licenses held, and any disciplinary recordLook up→
Bring your numbers
The first meeting goes on establishing where you stand whatever the billing structure, and on the clock if it is hourly. Your summary carries that already: income and estimated tax, cash flow and savings rate, assets and debts, and where the retirement projection lands. One page, printable or saved as a PDF.