When you’re just starting out in your investing journey, you may feel a bit overwhelmed about where to put your money. If you’re looking for real help, you might turn to a financial advisor.

But what is a financial advisor, and how do they differ from others giving investment advice? Make sure you know the difference between an accredited professional and someone who may not have your best interest at heart.

What is a financial advisor?

A financial advisor is essentially anyone who provides financial advice. There isn’t a lot of oversight, which means anyone who claims to have knowledge about money can call themselves a financial advisor.

Sally Brandon, a senior vice president at investment management firm Rebalance, said it’s an unregulated title.

“The term ‘advisor’ is problematic,” Brandon said. “Just about anybody who sells stocks or insurance products to earn a commission can claim to be a financial advisor.”

Brandon suggested hiring a registered investment advisor (RIA) to manage your money. “If you hire an RIA, you have hired a person or a firm that is a fiduciary, which means that person or firm is required by law to act in your interests ahead of their own,” Brandon said. “No crazy hidden fees and no misguided investment ideas that don’t fit your needs just because they get a commission out of it.”

Having a fiduciary means a financial specialist is working in your best interest — not their own.

Brandon also suggested hiring a Certified Financial Planner (CFP). CFPs can help you analyze where your money will be put to its best use: investments, retirement or even saving for your child’s education. CFPs don’t just help with investing; they help with money management. While you don’t need to find someone who is both an RIA and CFP, consider what your financial needs are and what you hope to get out of the relationship before deciding who to hire.

What does a financial advisor do?

Your advisor is meant to serve as your money friend. They should discuss which investments are best for you, what each type of investing could be most beneficial and how best to manage your money. The best kind of advisor makes sure you’re making worthy investments for you — not for them.

When you work with a financial advisor, they’ll go over how much money you need for your different investment interests, such as stocks, bonds and mutual funds. For example, talking to an advisor — as opposed to simple money management — could help you strategically navigate a large amount of money you’ve recently come into. Depending on what you need, talking to a real person may be a better option than a robo-advisor.

What are robo-advisors?

A robo-advisor is exactly what it sounds like: a robotic financial advisor. Instead of a human managing your money, algorithms and computer programming can automatically set up and manage your investments.

When you sign up for a robo-advisor, you’ll answer a few questions about your investment preferences. Your portfolio is then selected based on your specific requests and needs.

Many robo-advisors still offer access to a CFP, but Brandon said some companies forget that real humans matter. “Most robo-advisors are too heavy on the ‘robo’ part,” Brandon said. “There’s nobody there to talk to, and if you do get a number it’s a distant call center, not your advisor.”

Not all robo-advisors are the same, but if you prefer human interaction and want to speak with someone, you may not like robo-advisors. However, robo-advisors do typically charge lower fees so you’ll need to consider the trade-offs.

How much does a financial advisor cost?

The less money you dedicate to paying someone else, the more will be invested. But regardless of who helps you manage your investments, they’ll come with an extra cost.

Advisors can earn their paycheck in a few different ways:

• Fee-only: An advisor who only earns money from the fees you pay. They don’t earn a commission and they are less likely to sell you something you don’t need.
• Fee-based: These advisors accept commission from third-parties while also charging a fee.
• Commission-based: Advisors who earn a portion of money when you buy a product they offer. They might be less willing to consider you and your investments, and more willing to put money in their pockets.

The specific costs can vary depending on the firm you choose and how your money is handled. For robo-advisors, fees might run 0.3% of your assets up to 2% for human advisors, according to Brandon.

“I know 2% doesn’t sound like much money, but it’s 2% of your total retirement savings, not 2% of your gains in any given period,” Brandon said. “Some years you can pay the advisor more in fees than you make in returns, and that can run into thousands of dollars.”

Many firms charge a percentage of your total investments, also known as assets under management (AUM). There might be fixed, hourly, commission or performance fees that are tacked on. The amounts can vary depending on your firm or company choice, so it’s wise to do the math before committing.

For example, if you have $100,000 in assets and a firm is charging 2% of AUM, that’s $2,000 a year. If you set up a financial plan, those fixed fees might cost another $1,000. If you’re talking to someone for a financial consultation, that could average about $200 an hour.

Before you know it, your investment cash has taken a hit. It’s hard to avoid fees completely but try to find companies that keep your costs as low as possible.

How to pick a financial advisor

Due to the lack of major oversight on what it means to be a planner or advisor, you’ll need to take the vetting into your own hands.

It’s worth your time to make sure your advisor is who they say they are. You can check a firm’s licensing by going to BrokerCheck, and you can look up a specific advisor or planner in the SEC’s Action Lookup. If someone has had court orders against them, it’ll be in the database.

If you’re choosing a local financial advisor, check your state’s securities regulator. Here, you can find and verify licenses.

It’s also perfectly normal to ask advisors for their Form ADV. This is how advisors register with the U.S. Securities and Exchange Commission (SEC) to verify their company’s practices. Companies must tell customers about the company’s offerings, the advice they give, fee schedule and conflicts of interest. They’re also required to give an update to customers every year as new employees are hired and changes occur. Feel free to look up an advisor’s Form ADV as well.

Don’t be scared to ask a potential advisor any questions you have, especially when it comes to their expertise. Ask if they are a fiduciary and have your best interest in mind. Find out how often they talk to and consult with clients. See how they earn their money and if they’ve ever had any legal trouble. Doing your homework is encouraged — your advisor could make or break your entire investment strategy.

When it’s time to hire a financial advisor

If you’re not sure if you need a financial advisor or not, ask yourself a few questions before you settle on one.

• How much am I investing? Brandon suggests if you have $100,000 or more in investable assets, you should consider hiring a financial advisor. If you don’t have that much but still want to start investing, a robo-advisor might be the way to go.
• What are my investing goals? Are you looking to manage your investments with a minimal amount of work? A robo-advisor might be enough. Are your investments more complex than you originally started with or it’s too much to handle? Try talking to a professional.
• How much am I willing to pay for help? Just about every firm has fees of some kind. Robo-advisors keep costs low because there are fewer people running the show. If you want the minimum amount of management and still want to be able to speak to a person, try a hybrid company. Find a firm that offers mostly robo-advisors with the option of talking to human experts when you have questions or concerns.
• Can I do this on my own? If you’re having trouble understanding how to invest, or would rather not learn, hiring a financial advisor to help you make the most out of your money is probably worth it.

Regardless of which type of investing help you choose, make sure you’re choosing the right one for you. Talking to a financial planner, advisor, broker or other investment specialist is a great way to make sure you’re on the right track with your money. But make sure you don’t pick one who isn’t clearly a specialist or expert in their field.