What does “free financial advisor” really mean?
Some financial advisors offer free consultations on a pro bono basis. These services are available to those who need financial advice and can’t afford it, such as low-income families. The Financial Planning Association (FPA), for example, works with a network of financial planners who volunteer their services.
“FPA has chapters across the country, and a lot of those chapters engage in pro bono financial planning in their areas,” says Dennis Moore, CEO of FPA. “We also have some national initiatives.”
Some credit counseling agencies also offer free services for individuals who need help managing their debt.
“Free” could also mean that the cost of the financial advice is priced in elsewhere. For example, a bank that offers free advising might make money from your account in other ways that offset the cost of the financial advice. A wealth manager who oversees your investments might offer unlimited consultations as part of the annual assets under management fee.
How financial advisors make money
Typically, financial advisors make money from the fees they charge their clients, commissions they earn from selling financial products or a combination of both types of compensation. Advisor fees are usually in the form of an asset-based fee, where the advisor charges a percentage of the assets they manage for a client, or a flat fee. Other fee models include hourly fees, retainers or subscriptions.
Commission-based advisors earn a commission by selling certain financial products, such as investments or insurance. You might see a commission-based advisor advertise their financial advice as free, but be aware that their income comes from the products they sell to their clients.
This creates a conflict of interest, since they could be incentivized to recommend products that earn them more money, even if they aren’t ideal for your situation. Experts generally recommend working with a fee-only financial advisor, since they’re only paid by the client and thus have fewer conflicts of interest.
How free advisor offers typically work and who qualifies
Pro bono advisors
If you need help with financial planning and can’t afford to hire an advisor, it might be worth looking into whether you qualify for pro bono financial advice.
The Foundation for Financial Planning (FFP) works with various organizations, including FPA, to support nationwide pro bono financial planning programs. Professionals who work with the FFP offer free financial advice to underserved populations, including low-income households, military members and veterans, survivors of domestic violence, individuals impacted by natural disasters, people experiencing medical or financial crises and others.
Marybeth Breed, a certified financial planner (CFP) and chair of FPA’s New England chapter, says her chapter works with several community-based organizations to connect with people in need of pro bono financial help. One of these partnerships involves helping patients with cancer navigate the financial challenges that come with that diagnosis.
However, pro bono planning isn’t necessarily only for those currently experiencing a crisis. Celeste Revelli, CFP and national FPA board member, says the FPA’s pro bono program is open to anyone who feels they could benefit.
“Especially in this day and age, it’s such a very fine line between being in need and being able to support yourself,” Revelli says.
Credit counseling
Credit counseling can help improve the financial circumstances of individuals who are struggling to manage their debt. Many nonprofit credit counseling organizations offer free or low-cost counseling where they’ll help you create a plan to pay off your debt.
The Financial Counseling Association of America is a nonprofit that can connect you with credit counseling agencies that offer free initial consultations. During this consultation, a counselor will review your finances and make recommendations to help you manage your budget and get out of debt. They also offer paid services, but you aren’t obligated to purchase them.
The National Foundation for Credit Counseling (NFCC) works similarly, setting you up with a free or low-cost counselor who creates a customized plan to help you manage your debt. The NFCC says most of its affiliated agencies offer free counseling.
If you want free help, be sure you’re working with a reputable credit counseling organization. There are also for-profit debt settlement companies that can try to negotiate with creditors on your behalf, but it can be risky to work with these companies, since they often advise clients to stop paying their debt to encourage creditors to negotiate.
This can have serious consequences for your credit and might even lead to you being sued by the creditor. You could also owe taxes on any debt that is forgiven. Additionally, it’s not uncommon for scammers to pose as legitimate debt settlement companies and charge high upfront fees.
To ensure you’re dealing with a legitimate agency, you can check the Justice Department’s list of approved credit counseling agencies.
Free consultation
Many financial advisors or firms offer free initial consultations as a courtesy to prospective clients who are considering using their services. While you probably won’t get comprehensive advice during this meeting, it can be helpful if you’re curious about paying for financial advice but aren’t sure if it’s worth it for you.
“The initial consultation is a great way to shop around,” Revelli says.
During this consultation, you can ask the advisor about the services they offer and the experience they have working with people like you.
Customer benefits
It might be worth seeing if any of the financial institutions you do business with offer free financial advice.
Some banks and credit unions provide access to advisors as a perk for existing customers. SoFi, for example, offers a complimentary session with a financial planner for basic members, while SoFi Plus members get unlimited access to advisors.
If you have a brokerage account with an investment firm, access to a financial advisor might already be included in the services they provide you. While not technically “free,” it could be something you’re already paying for without realizing it. Similarly, your retirement plan provider might also offer free consultations or access to an advisor.
Free robo advisors
If you’re just looking for investment management, some of the best robo advisors offer free or low-cost digital services. For example, Schwab Intelligent Portfolios charges no advisory fee, though you’ll need at least $5,000 to invest with this service. Fidelity Go has no advisory fee for accounts under $25,000, plus no account minimum.
For robo advisors that do charge a fee, the median cost is 0.25% of your assets, or $2.50 for every $1,000 you have invested. This fee is typically deducted directly from your account.
Other free financial resources
The internet is full of free resources that can educate consumers and help them manage their money.
- Investor.gov has a page dedicated to free financial planning tools that help you estimate how much you’ll need to save for retirement, learn how compound interest can grow your investments and more.
- The Consumer Financial Protection Bureau has a library of articles to help you navigate a variety of financial topics, from buying a house to planning for retirement.
- Your bank, brokerage firm or retirement plan provider might also have free tools and calculators that can help you with a variety of planning tasks, such as determining your ideal asset allocation for your portfolio, whether it makes more sense for you to rent or buy a house or how much you’ll be required to withdraw from certain tax-advantaged accounts in retirement.
- Free or low-cost budgeting apps can be a helpful option for tracking your spending and sticking to your budget. You can often connect your financial accounts to these apps so that your spending is tracked automatically.
The hidden costs and trade-offs behind “free” financial advice
If someone offers you free financial advice, think about what they stand to gain and how they’re actually paid.
Some free financial advisors are salespeople who earn a commission by selling financial products to clients. If you’re looking to purchase a specific product, such as a life insurance policy, working with a commission-based advisor could be a cost-effective way to do so. Just keep in mind that there can be more conflicts of interest with this type of advisor.
How to evaluate a free advisor offer to protect your interests
Commission-based advisors aren’t the only financial professionals with conflicts of interest; every advisor-client relationship has some potential conflicts. For example, a free advisor who works with your bank might be incentivized to make recommendations that could financially benefit the bank.
The best financial advisors are often fiduciaries who operate in a fee-only capacity, meaning they’re paid only by you and they have an obligation to act in your best interest at all times. However, even those working with a fiduciary financial advisor should take steps to ensure the advisor is trustworthy.
Find out how the advisor makes money
One of the most important questions to ask a financial advisor, even a free one, is how they’re compensated.
If you’re working with an investment professional, they might be required to provide you with a relationship summary, which includes information about how they make money and what their conflicts of interest are.
Check their disciplinary history
If the professional is a registered investment adviser, you can look them up on the Securities and Exchange Commission’s Investment Adviser Public Disclosure website and see if they have any disclosures on their profile, such as customer complaints or regulatory actions.
For representatives of brokerage firms, you can see their disciplinary history on Finra’s BrokerCheck site.
Watch out for scams
Financial services scams are common, and they often target vulnerable people, such as those who are struggling with their finances. If you need help from a free financial advisor, carefully vet the professionals you’re considering working with.
To avoid being scammed, the Federal Trade Commission recommends looking out for certain red flags, including high-pressure tactics or offers that seem too good to be true. A scammer might initially offer free training to draw you in or claim that an investment is risk-free.
Do your due diligence before agreeing to work with any financial professional. If you think someone might not be legitimate, search the name of the advisor or their company online along with words like “scam” or “fraud” to see what comes up.
FAQ
When is a financial advisor truly free?
It’s rare that a financial advisor is truly free, but there are some instances where it can happen. Pro bono financial advisors and nonprofit credit counseling agencies often provide free services to those in need.
What questions should I ask during a free consultation?
You can use a free consultation with a financial advisor to ask about the services they provide, what strategies they would likely use for your financial situation and how much it will cost to continue working with them.
Are free advisors less qualified than paid ones?
Not necessarily. Many highly-qualified financial advisors offer pro bono services to individuals who need help but can’t afford professional financial advice.
Can I switch from a free-consultation advisor to a paid model later?
Many advisors offer complimentary initial consultations, but for ongoing advice or comprehensive financial planning, you’ll likely need to pay.
What are the red flags in “free financial advisor” offers?
If an advisor makes promises that seem too good to be true or pressures you into making decisions quickly with few details, that’s a sign you could be dealing with a scammer rather than a legitimate financial advisor.
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