How to pick a financial adviser

Hire a fiduciary, not a broker

Brokers make money from commissions, markups and fees on the investments and insurance they sell you. They act in their own best interests.

Only fiduciaries are legally required to act in your best interests. Fiduciaries cannot accept commissions. They are compensated with hourly, fixed or asset-based fees.

Some advisers try to be both (the industry term is "dually registered" or "hybrid adviser"), but someone who earns any part of their income from commissions can’t be unbiased.

"When deciding whether to work with a financial adviser, you absolutely must ask whether they hold a Series 7 license," says Elle Kaplan, a fiduciary and the CEO of Lexion Capital Management in New York City.

A Series 7 license qualifies an individual to earn commissions from soliciting, buying and selling securities like stocks, bonds and mutual funds.

Someone who holds this license is not a fiduciary, Kaplan says, because all fiduciaries are required to turn in their Series 7 licenses.

Also avoid advisers who sell self-branded funds or other products, she says.