8 Types of Financial Advisors to Know and Who’s Right for You

There are several types of financial advisors, and it’s important to find the right one to help you with your specific money goals. Some financial advisors specialize in long-term retirement planning, while others have expertise in budgeting and helping clients manage money stress. Other options include robo-advisors, which simulate human advisors.

Below, we’ll clearly define the eight types of financial advisors, tell you who they’ll benefit most, and describe the certifications they should have. We’ll also share the typical fees to work with each advisor type and tips for choosing the right financial advisor.

Table of Contents

1. 8 types of financial advisors
   1. 1. Certified Financial Planner (CFP®)
   2. 2. Registered Investment Advisor (RIA)
   3. 3. Wealth managers
   4. 4. Broker-dealers
   5. 5. Chartered Financial Analyst
   6. 6. Financial coaches
   7. 7. Robo-advisors
   8. 8. Financial therapist
2. Tips for choosing a financial advisor

8 types of financial advisors

Think you might need a financial advisor? These eight professionals can help you with a variety of money questions.

1. Certified Financial Planner (CFP®)

⭐Best for: Long-term financial planning

Many professionals use the title of financial advisor, but only highly trained advisors who meet rigorous qualifications can be Certified Financial Planners (CFP®). CFP®s must have a college degree and pass the CFP® exam. They must also meet other qualifications, like experience in the field, and they must agree to a code of ethics and standard of conduct.

If you want to find an experienced financial advisor who is legally bound to act in your best interests, look for the CFP® designation. The fee to work with a CFP® varies. Some charge a flat fee each month, while others earn a percentage of assets under management (AUM). The cost for a full financial plan can range from a few hundred dollars to a few thousand dollars.

CFP® professionals generally focus on goal-based financial planning, built on a strong foundation of cash flow management and budgeting. In addition to helping clients align their financial decisions with their life goals, we provide guidance on investment strategies, tax planning (guidance, not specific advice), risk management, retirement planning, and estate planning.

Ultimately, one of the most valuable outcomes is helping clients gain peace of mind by having a clear, personalized financial plan in place.

2. Registered Investment Advisor (RIA)

⭐Best for: Personalized investment advice

A Registered Investment Advisor (RIA) can be a person or an entire financial planning firm. These are professionals who provide investment advice and portfolio management for clients. 

An advisor or a firm must register with the Securities and Exchange Commission (SEC) to be an RIA. In 2023, the Investment Adviser Association reported that there were more than 15,000 RIAs.

Many RIAs also hold CFP® certifications. The difference is that RIAs specialize in investing on your behalf in a way that honors your risk tolerance and money goals. CFPs can also give investing advice; however, they offer other services like advice on home ownership or estate planning. Typically, RIAs charge an assets-under-management fee of around 1%.

3. Wealth managers

⭐Best for: High-net-worth individuals and families

Wealth managers are a specific type of financial advisor specializing in high-net-worth clients and families. They can assist with estate planning, inheritance questions, charitable giving, and tax planning. Wealth managers can also access specialized banking and lending options for their clientele and private equity investment opportunities.

Typically, to work with a wealth manager, you must meet minimum investment requirements, which can vary by firm. To give an example, Fidelity’s Private Wealth Management offerings require clients to have $10 million or more in assets and charge a fee of 0.20% to 1.04%.

4. Broker-dealers

⭐Best for: Alternative investments

Broker-dealers are the people and brokerage firms who make trades on behalf of their clients. Broker-dealers trade stocks, bonds, mutual funds, and alternative investments. Even when you trade stocks on your own online, the broker actually completes the trade on your behalf. 

Broker-dealers can offer many types of investments, including venture capital, hedge funds, and specific investment opportunities for groups of people, like seniors. Broker-dealers are not typically bound by the same fiduciary rules as RIAs or CFP®s, and they typically earn money through commissions, like transaction fees per trade.

According to FINRA, broker-dealers have suitability obligations, meaning they must recommend investments that are suitable for customers. This is different from a fiduciary, who must act in the best interest of the customer.

5. Chartered Financial Analyst

⭐Best for: Large firms

The Chartered Financial Analyst (CFA) certification is considered one of the top investment credentials available on the market. To become a CFA, you need to meet specific qualifications and pass three rigorous CFA exams.

CFAs typically work for large organizations, and according to the CFA Institute, the average salary for a CFA is $180,000. However, CFAs don’t typically work one-on-one with individual clients. Their expertise is primarily in helping businesses with financial reporting, research, and financial analysis.

6. Financial coaches

⭐Best for: Budgeting advice

Financial coaches help their clients with day-to-day money management tips. They provide accountability, budgeting advice, and strategies to pay off debt quickly. While there are no regulatory requirements to become a financial coach, certifications are available. 

The AFCPE offers an Accredited Financial Counselor (AFC) certification. To get it, you’ll need to meet education requirements, pass the AFC exam, meet experience hours, and sign the Code of Ethics. The NFEC also offers a certification called the Certified Personal Financial Wellness Consultant that those interested in financial coaching can pursue as well.

Typically, financial coaches charge an hourly fee to work with them or offer group coaching and support. The hourly fee varies by coach but generally is $100 to $300 per hour.

7. Robo-advisors

⭐Best for: DIY Investors

Robo-advisors are online platforms that use algorithms to suggest investment portfolios. They’re essentially a computer version of a financial advisor. The software can perform tasks financial advisors are typically responsible for, like rebalancing a portfolio and harvesting tax losses. Many large brokerage firms and banks now have their own robo-advising software.

The main benefit of robo-advisors is the low management fee, from 0% to 0.35% depending on your portfolio’s size. Many robo-advisors offer advice from human financial advisors for an extra fee in case you need additional support.

8. Financial therapist

⭐Best for: People who want to heal emotional money struggles

A financial therapist is a counselor who helps people manage their emotions around money. Qualified therapists or financial professionals can earn the Certified Financial Therapist (CFT) certification after applying, completing coursework, and passing an exam. Often, CFTs start their own business advising clients.

Financial therapists typically charge a flat fee, which can range from $100 to several hundred dollars per session. Their goal is to help people heal emotional money problems, such as overspending or having a scarcity mindset.

My clients collaborate with a CPA and an estate planning attorney, ensuring that their work and recommendations are aligned with the client’s overall financial plan. Additionally, I work closely with investment advisors and an investment team to implement the investment strategies outlined in the financial plan.

Tips for choosing the right financial advisor

If you want to hire a financial advisor, here are our tips for choosing the type of advisor that’s best for your individual money needs. 

Identify your financial goals

First, take the time to ask yourself why you want to work with a financial advisor.

• Do you want help choosing the best investments?
• Are you struggling with overspending?
• Did you recently inherit a large sum of money and want to know how to best manage it?

The answers to these questions can help you choose which type of advisor is best for you.

For example, a financial therapist or a financial coach can help you with emotional triggers regarding money and budgeting. However, you will need to work with a financial advisor, like a CFP®, if you are more interested in long-term financial planning, such as retirement or funding your children’s college education.

Verify credentials

As evidenced by the types of advisors we discussed above, financial professionals hold many titles and certifications. Before working with someone, ask them what licenses and certifications they have. 

If you want to verify credentials further, you can verify a CFP®’s certification on the CFP® Board website. You can use FINRA’s BrokerCheck to make sure your broker or brokerage firm is registered and legally allowed to purchase investments on your behalf.

Understand payment structures

Financial advisors earn money in several ways. The most common fee structures are fee-only and commission-based. Sometimes, they use both of these fee structures by charging a flat fee to create a financial plan and an AUM fee on the investments they manage.

Before hiring a financial advisor, ensure you understand the total cost of your fees. Ask what happens if you decide to part ways, and make sure you understand whether or not your fee changes as your total net worth grows.

Check that it’s a good fit

In addition to verifying an advisor’s credentials and payment structures, choose someone who is a good fit for your personality. Some advisors cater to specific professions, young families, underserved populations, women, high-net-worth clients, or other groups.

You should genuinely like and trust the financial advisor you hire, so make sure it’s someone you feel understands your life stage and goals. It’s important to view the advisor-client relationship as a partnership and be confident that your advisor genuinely listens to your concerns and answers your questions.

Need help choosing the right advisor?

Money Pickle makes it easy to get matched with a vetted financial advisor based on your specific goals. You’ll get a free, no-obligation 45-minute video call with your matched advisor to ask questions, talk through your situation, and see whether it’s a good fit—no pressure to commit.