I’m ‘clueless’ about investing. Is hiring a financial adviser worth it though?

I have some money laying around and really want to get into investing both short term and long term. I am completely clueless and ignorant when it comes to it and don’t know where to start. I thought about starting with stocks with an app like Robinhood or Webull or some ETFs maybe and then moving onto Roth IRA’s or 401k’s and eventually maybe even investing in some property. Just some ideas.

I was thinking about paying for a financial adviser/investor to help me get started and explain to me how this works. Maybe a consultant from the more popular companies like Vanguard, Fidelity, and Schwab. Or really any kind of advisor that is knowledgeable with investing. Is it worth spending money on one to at least get started and what type of professional should I look for? Appreciate any advice!

(Looking for a new financial adviser too? This tool can match you to an adviser who may meet your needs.)

What the pros say: First, congrats on deciding to invest. Investing is essential to outpacing inflation and saving enough for retirement. Indeed, “since about 1800, stocks have consistently returned an average of 6.5 to 7.0% per year (after inflation),” according to an analysis of the S&P 500 by consulting firm McKinsey and Co. 

That said, no doubt all the lingo around investing can sound intimidating. And yes, a pro can help you do it — but you may not need one either. We will break down the pros and cons of hiring a financial adviser, and how to DIY as well.

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.

The pros and cons of a getting a financial adviser

One of the biggest pros of a financial adviser is simply having someone to guide you so you avoid costly investing mistakes. Indeed, certified financial planner Alison James at WorthWise Financial Partners says without developing the knowledge to choose your investments wisely and sufficiently diversify, the outcome is more like gambling than investing. 

“As a novice investor though, you could start investing and gain valuable knowledge along the way by working with a fee-only adviser. Later, you may decide to venture out and invest on your own, or you may see more value in continuing the adviser relationship, but you will have the knowledge to make the right choice,” says James.

How to find a good adviser

That said, you want a good adviser. Look for a fee-only adviser (this ensures they’re only being paid by the client and not earning any commissions which might create a conflict of interest) with plenty of experience. You might for example want a certified financial planner (CFP), as they’ve undergone extensive training and testing and have thousands of hours of experience working in a financial planning capacity. CFPs are also fiduciaries, meaning they’re obligated to put their client’s best interests ahead of their own.

Note that advisers at big banks or financial institutions may not be fee-only and instead may be fee-based or get commissions. Advisers who aren’t fee-only may earn commissions when recommending or selling financial products, meaning they may recommend something that pays them a handsome fee — but isn’t necessarily the best choice for their client.

The lesson?  when searching for an adviser, always consider how they’ll get paid to avoid that conflict of interest. “Do they sell investments and make money from the commission or do you pay them a set fee or hourly rate? Are they managing the account and charging you ongoing fees or are they showing you how to set it up and do it yourself,” says certified financial planner Josh St. Laurent of Wealth In Yourself.

In your case, it also sounds like, rather than getting an adviser who manages your investments for you, you might want an advice-only planner who charges either by the hour or a monthly flat fee, says certified financial planner David Barfield at Datapoint Financial Planning. “This type of adviser will help you develop a financial plan that touches all areas of your personal finances, including your investment accounts. The advice will not be limited to the accounts he or she manages since investment management is not part of the engagement or fee structure,” says Barfield. 

Instead, the planner will give you advice on where, how and how much to invest and help you execute the strategy across all of your investment accounts. “Since the adviser is helping you execute the plan, you will learn the answers to all the questions posed, such as traditional versus Roth IRA, traditional versus Roth 401(k), stocks versus mutual funds, where you should save first, how much you need to save in order to meet your goals and so on,” says Barfield. 

The apps you were considering may not accomplish all that. Certified financial planner Lea Ann Knight at Better Money Decisions says those kinds of apps are fun and low-cost, but might not be the best fit for you.

Just like a health physical, a financial physical check up is important to your financial well being which can actually result in less stress and greater health, says certified financial planner Marianela Collado at Tobias Financial Advisors. “Most advisers are willing to do a complimentary meeting to give overall thoughts on how to best position yourself. Ideally, you’d work with a fee-only fiduciary adviser who will help you think about your whole picture and not push any commission-based products. When someone is asking about what type of investments they should consider and whether or not they should move it to a Roth or real estate, it’s a sign they need real guidance and a long term wealth-building investment approach,” says Collado.

To find an adviser, consult the National Association of Personal Financial Advisors (NAPFA) or the CFP Board’s Let’s Make a Plan website. You can also use this tool to get matched with an adviser who may meet your needs.

It can also be helpful to get referrals from friends, family or coworkers, but experts still recommend interviewing 2 to 3 professionals to see who you feel most comfortable working with. “Understand how they get paid. Find out what’s included in the services they provide. Ask if you have to invest your money with them or purchase a product from them in order for them to continue working with you. Ask them to communicate their process of how they work and what their experience working with people in your situation is like,” says certified financial planner Terrance Hutchins of Logos Financial Group.

What a financial adviser might cost

The big con of a financial adviser is typically the cost. Fortunately, there are many different fee structures available, and pricing varies widely depending on factors like where you’re located, how much experience an adviser has and the scope of what you’re looking to accomplish. For advisers working with an assets under management (AUM) structure, 1% AUM is considered the industry standard, while hourly planners might charge $150 to $450 per hour and flat-fee advisers tend to charge between $2,500 and $10,000 annually.

Financial planning on your own: The DIY route

You already have some good instincts about what to invest in: “ETFs are a great choice since they have low fees, are tax-efficient and trade similar to stocks,” says James. And you’re likely capable of figuring out what you need to do to invest smartly on your own.

Consider enrolling in a free online personal finance course to enrich your financial literacy. Learn about budgeting, avoiding debt, how to invest and more through sites like Udemy.com’s Personal Finance 101, Khan Academy’s Personal Finance course or Indiana University’s Planning for Risk and Retirement offered through Edx.org. You might also want to do some reading on the subject and experts recommend books like The Intelligent Investor by Benjamin Graham, The Little Book of Common Sense Investing by John C. Bogle and The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by JL Collins.

(Looking for a new financial adviser? This tool can match you to an adviser who may meet your needs.)

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.