Financial advisers play an invaluable role in helping investors build their wealth. Because not all financial advisers are the same, investors must do their due diligence to find advisers who best meet their needs. Here are some tips to help with that process.

Fiduciary vs. Nonfiduciary Advisers

A fiduciary is a financial adviser who is legally obligated to act on behalf of the investors’ best interests. Nonfiduciary advisers, on the other hand, are under no such obligation. While these advisers must still help investors find suitable investments, they are not legally bound to put the investors’ interests ahead of their own. Because this can often cause a conflict of interest, it’s highly recommended that investors only work with fiduciaries.

Pick the Right Specialty

Some financial advisers work as general advisers and have a firm grasp on various investment areas. This type of adviser is ideal for investors looking for general investment advice. However, those investors looking for specific investment advice, such as retirement planning, high-net-worth estate planning, debt management, or small-business planning, should look for financial advisers specializing in that area of interest.

Check Financial Advisers’ Credentials

Investors should never simply pick the first financial adviser they find. Instead, it’s crucial for investors to check the credentials of any adviser they are considering. It’s a good idea to work with a Certified Financial Planner with several years of experience. Investors should also use tools, such as the FINRA-sponsored Broker Check, to check any adviser’s employment history, license status, certifications, and regulatory actions.

Understand the Fee Structure

Financial advisers use different fee structures to charge their clients. Many nonfiduciary advisers use a commission-based fee structure, which means they receive a certain portion of the investors’ profits. Fiduciaries, on the other hand, usually charge by the hour, by plan type, or by an overall percentage of the total assets in the investors’ portfolios. It’s important for investors to understand this pay structure and select one that best fits their budget.