Financial Advisors For Young Adults: Everything You Need To Know

Young adults face many financial challenges. These days, student loan debt, rising interest rates and inflation all make it harder to grow wealth.

Meanwhile, financial education is inconsistent in schools, which can leave you feeling underprepared when making financial decisions. A financial advisor can help, but how do you know if you need one?

Why Financial Advising Is Important for Young Adults

Any decisions that a young adult makes today have the ability to compound and impact their futures tomorrow. But the decision-making process is not as simple as it used to be.

Nowadays, young adults have even more decisions to make than their parents did. Do you pay off your student loan debt first, or do you build up an emergency fund? Do you pick pretax contributions to your 401(k), or should you make Roth contributions to it? What’s the best way to save for a house?

To add to the difficulties young adults face, the answer often is: It depends.

Everyone’s situation is unique, and it can be hard to wade through all the financial advice online to find what is relevant to you. While it’s important to educate yourself on finances, life can get in the way. If you’re feeling overwhelmed or too busy to figure it all out by yourself, it might be time to find a financial advisor.

Things To Consider When Finding a Financial Advisor as a Young Adult

Before reaching out to potential financial advisors, first, you’ll want to define what kind of help you need.

Most people think only of investments or insurance when thinking about financial advisors, but financial advisors can help with much more. Many advisors even have specialties and niches.

Here are some common financial topics young adults might need help with:

  • Student loans. According to Federal Reserve Board data, 34% of people under the age of 30 have student loan debt. Student loans, especially federal loans, have a lot of nuances and the wrong move can cost you. Do you need help planning for public service loan forgiveness, or do you need help selecting a repayment plan? Some financial advisors offer this service.
  • Occupation-specific. Many industries and jobs have their own unique financial planning needs. Some examples include financial advisors for doctors, nurses or teachers. There are a lot of niche advisors out there who focus on specific occupations.
  • Budgeting. Building good spending and savings habits when you’re still young can give you a solid foundation for a lifetime of financial success. Some financial advisors and coaches focus solely on building and maintaining a healthy budget. This can be especially helpful for people who overspend or who are carrying a lot of credit card debt.
  • Socially responsible investing. More and more young adults want their investments to reflect their personal views on environmental and social issues. A recent survey showed that younger generations are even willing to trade some investment performance for more socially conscious companies. A financial advisor can help guide you toward investments that align with your values.
  • Taxes. Optimizing your taxes while young can save you hundreds of thousands of dollars over your lifetime. While you can look for a tax professional to help with your tax planning and preparation, some financial advisors can help here as well. Look for advisors with a certified public accountant designation, otherwise known as a CPA, or an enrolled agent designation, also known as an EA.

How Much Will a Financial Advisor Cost You?

There are different ways to pay a financial advisor, and while there is no “one size fits all” approach, some options will work better for you than others.

  • Flat fee. A flat fee is a set amount that you and your advisor agree upon. It can be for a full financial plan, or it can be focused on a specific topic you want to cover. Sometimes this payment is in the form of a subscription—monthly, quarterly, annually, etc.—which could be a good option for you if you want to talk to your advisor on a regular basis.
  • Hourly. Hourly payments can be a great option if you’re on a budget and only have one or two questions. This option can get expensive fast, though, especially if your situation is more complicated.
  • Percentage of invested assets. This is the most common way that a fee-only financial advisor gets paid. The advisor gets a percentage of the accounts they manage for you, typically around 1%. However, this offering is usually not accessible to young adults. Most of a young adult’s money is in accounts that financial advisors can’t manage, such as 401(k)s and savings accounts. Many advisors who work on this model have high account minimum requirements that can be difficult to meet when you’re just starting out.
  • Commissions. Some financial advisors make a commission when selling you a product such as life insurance or certain types of investments. In this instance, the commission you pay on these products will contribute to the advisor’s final payment.

Each of these options has its pros and cons, so first consider what you need help with. It’s also important to remember that some advisors may offer a combination of options—such as percentage of invested assets plus commissions—to provide you with advice.

How To Find the Best Financial Advisors for Young Adults

Keep in mind that you aren’t stuck with just the financial advisors in your town. Many advisors who work with young adults are available virtually.

Here are some great online resources to find the right advisor for you:

  • XY Planning Network. XY Planning Network is a group focused on providing financial advice to younger generations. Their website allows you to filter by advisor specialty so you can find the advisor who best fits your needs.
  • Wealthtender. Wealthtender is a website that allows you to search for an advisor by different focus specialties. You can sort by age group focus—such as Gen X, Y or Z and millennials—or else by planning topics such as socially responsible investing or budgeting.
  • NAPFA.org. The National Association of Personal Financial Advisors, or NAPFA, is an organization of fee-only financial planners. They can connect you with a local financial advisor or a virtual one who meets your needs.
  • Garrett Planning Network. This is a great resource if you are looking for a fee-only financial advisor who charges hourly.
  • Certified Student Loan Professionals. CSLP is a listing of advisors who specialize in student loan planning.

Editorial note: Jessica Goedtel is a member of the XY Planning Network and NAPFA. She receives no commissions or perks for mentioning these organizations in this article.

Frequently Asked Questions (FAQs)

What does fiduciary mean?

When it comes to financial advisors, a fiduciary advisor is a professional who is required by law to act in their client’s best interest.

What does fee-only mean?

If a financial advisor is fee-only, that means the financial advisor you’ve chosen does not make any commissions from selling investment products to you.

What is a CFP?

A certified financial planner is a designation for financial planners. It means that they have met a set of specific standards, including testing, ethics and experience. CFPs must always act as fiduciaries for their clients. They also have annual continuing education requirements.

What questions should I ask when looking for a financial advisor?

When looking for a financial advisor there are a number of questions you may want to ask. For example, you may want to ask them how you’ll be charged, what their qualifications are or if they are a fiduciary.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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