What should you consider when choosing a financial adviser?

It is one thing to realize you could benefit from the help of a financial adviser, but it is another thing entirely to find an adviser who is actually a good fit for you.

The effort that sorting through your options may require should not discourage you from seeking financial guidance, however. After all, a financial adviser can "optimize your investment portfolio, manage your cash flow and prioritize long-term savings goals," said Forbes, among a multitude of other helpful services, potentially making you better off financially in the long run.

For that potential to pan out, it is important to make the right pick. To do that, you'll want to "have some basic knowledge about your options and, most important, what you hope to get out of it," said The Wall Street Journal. 

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The type of adviser that is right for you

There are several different types of financial advisers out there, and you can more easily narrow down your options if you know which type you are looking for. Some common types include:

Registered investment advisers (RIAs): These advisers "create financial plans and invest client assets based on those plans," said the Journal. They are bound by fiduciary duty, which means they must act in their clients' best interest.

Robo-advisers: A robo-adviser is a "digital platform that offers automated algorithm-driven investing services with minimal human intervention," often with "low fees" and more accessible investment minimums, said CNN Underscored. While a "good choice for younger investors who are just beginning to save or those with few assets to manage," they may not offer the level of service some people need.

Brokers: This class of advisers can "sell financial assets and are paid commissions for the products they sell, which can create conflicts of interests," said the Journal. However, some may find it convenient to access financial products through their advisor.

The services you want an adviser to provide

"Before you start looking for the right adviser, reflect on what you're hoping to get out of the relationship," as this will help guide your search, said NerdWallet. For instance, some advisers "may provide holistic help," while others "might be specialists, meaning they have certifications or expertise in a particular area of finance."

Some examples of services that advisers may be able to offer include:

• Financial planning
• Investing
• Tax planning
• Retirement planning
• College planning
• Estate planning

How the adviser charges clients (and earns money)

Understanding how an adviser charges their clients is not only important for budgetary considerations, but also your own peace of mind. You will be glad to know that your adviser will act in your best interest rather than their own. 

There are a few main ways that advisers may structure their fees, with advantages and disadvantages to each:

Fee-only: Fee-only financial advisers are "paid based on a percentage of your invested assets, a flat annual fee or an hourly rate," said Forbes, and "their sole income source is client fees." While this minimizes potential conflicts of interest, fee-only advisers "might be limited in their product offerings," said Kris Maksimovich, the president of the Lewisville, Texas, headquarters of Global Wealth Advisors, to U.S. News & World Report.

Fee-based: Fee-based advisers will charge fees "while also earning commissions on the products they recommend to you," said Forbes. Some fee-based advisers are "fiduciaries, though it's important to determine if they're always acting as fiduciaries or if they 'pause' fiduciary duty when discussing certain types of products," like insurance.

Commission-based: Commission-only advisers are not fiduciaries and rather are "only held to the suitability standard," said Forbes. They are "paid a commission based on products they sell you, including investments and insurance policies."

The adviser's reputation and background

Another factor to consider when selecting a financial adviser is their certifications, which can indicate a certain area of expertise and more rigorous training, as well as their disciplinary record and reputation with clients.

"Always verify any credentials they claim to have and check to see if they have had any disciplinary problems such as fraud," said NerdWallet. You can easily check this by "looking up their Form ADV" and making sure to review their "employment record (and look for red flags like disciplinary actions) on FINRA's BrokerCheck website."

Make sure to listen to your gut. After talking to an adviser and asking them questions, contemplate whether or not this is someone you could see yourself working with.