Choosing the right financial adviser for your unique situation is not an easy task. Recommendations from a friend or business colleague can be a good source, but remember the right adviser for one person may not be a good fit for your needs. Here are seven steps to take in evaluating either a new financial adviser or one with whom you’ve been working for a while. (For more, see: Shopping for a Financial Advisor .)

Understand How Your Adviser is Paid

While adviser compensation may not be as important as their competence, its imperative that you understand all forms of compensation that your adviser would receive as a result of working with you as a client. There are several forms of adviser compensation including various types of sales commissions from the sale of financial products and various types of fees.

Commissions can include commissions paid on the front-end, commissions paid if your sell the product during a period of years known as the surrender period, and ongoing trailing fees.  Know that in all cases the costs of these commissions are born by you the investor and they serve to reduce your returns.

Other financial advisers charge fees. These fees may be hourly, calculated as a percentage of the assets invested, or a flat ongoing fee. Some advisers are fee-only; others are paid via fees and commissions.

In all cases the cost of advice from your financial adviser should be spelled out and fully disclosed to you. (For more, see: Paying Your Advisor: Fees or Commissions? )

Understand Any Conflicts of Interest

This is very much related to the adviser’s compensation method. If your financial adviser is paid via commissions on the investment and insurance product he or she sells to you will this influence the choice of financial products they suggest to implement their financial recommendations?

Along these same lines, if your adviser is an employee of a financial services firm that also offers financial products for sale, he or she may be incentivized (or possibly required) to give preference to the firm’s financial products over others in making recommendations to you. While this has been widely discussed in terms of traditional brokerage firms and wire houses, firms like Fidelity Investments and The Vanguard Group also offer financial advice. This is not meant to say that every recommendation made to a product offered by the adviser’s firm is a bad one, but at the very least you should ask questions here. (For more, see: Standards and Ethics for Financial Professionals .)

Does This Adviser Work With Other Clients Like You?

Is your situation typical of the adviser’s client base? For example if you are a corporate employee looking for help planning for the exercise of your stock options, you should ask the adviser about their knowledge and experience in dealing with clients like you.  A financial advisor who deals primarily clients at or nearing retirement might not be a good choice for you if you are a 30 year old professional looking for a financial plan. (For more, see: What Type of Person Needs a Financial Advisor? )

What Services Does the Adviser Offer?

While this might seem obvious you should understand the services your financial adviser does offer and those they might not offer. For example most advisers offer advice on financial planning and investments. Retirement planning advice is also pretty common. However if your advice needs include very specific tax advice or perhaps business succession advice you will want to know if your adviser has expertise in these areas. Likewise, if your adviser is really only focused on the sale of annuities he or she might not be able to offer the full spectrum of financial advice that you need. (For more, see: How to Create a Business Succession Plan .)

How and How Often Does the Adviser Communicate with Clients?

It’s important for clients and perspective clients to understand how their financial adviser communicates with clients and the frequency of those communications. How often will you meet to review your portfolio and your overall situation? Quarterly, semi-annually, annually, as needed? Will these meetings be done in person or perhaps over the phone or via Skype or a similar online service? Its becoming more and more common for clients to work with their financial adviser remotely either by design or based on the client relocating to another area of the country for job transfers or possibly retirement. (For more, see: Why Clients Fire Financial Advisors .)

Additionally, does the adviser typically communicate by phone, email, or perhaps text message? Any or all are fine and both your preferences and the adviser’s may be based on your age and digital comfort level. The best course of action is to ask these questions up front when considering engaging the services of a new financial adviser. (For more, see: The Best of the Wealth Management Firms .)

Is the Adviser a Fiduciary?

An adviser who acts in a fiduciary capacity towards their clients agrees to provide advice and guidance that is solely in the best interests of the client. This is compared to suitability standard that is employed by advisers who work for broker dealers and other firms that sell financial products. The suitability standard means only that the products suggested must be suitable for the client. (For more, see: What You Need to Know about the Fiduciary Standard .)

There is much ongoing debate over a uniform Fiduciary Standard within the financial services industry and this is a topic that is much too extensive for an article of this type. This is also not to imply that financial advisers who are not true fiduciaries do not act in the best interests of their clients. Again, however, this distinction is important and you as a client or perspective client should ask these types of questions. (For more, see: Choosing a Financial Advisor: Suitability vs. Fiduciary Standard .)

Check on Professional Certifications and Training

Designations such as the CFP and many others are both a sign of an adviser’s commitment to their profession and most also require a significant amount of continuing education. As you might suspect there are numerous designations available to financial advisers and some are more meaningful than others. For example the CPA designation is the gold standard in the accounting profession but doesn’t in and of itself qualify an adviser to provide advice in areas such as investments and financial planning. Please note that that there is an excellent financial planning designation offered within the CPA community, the PFS designation. (For more, see: Why Financial Advisors Need to Earn Their CFP Mark .)

Moreover, I think that its important to understand the level of and types of experience your financial adviser has. Designations and formal training are important but there are many fine advisers without formal designations and certainly there are a number of advisers holding many credentials who are not skilled. One additional thing here: you can check on any regulatory blemishes on the adviser’s record at FINRA’s broker check site. (For more, see: 7 Financial Advisor Red Flags .)

The Bottom Line

The decision to hire a financial adviser can be a complicated one. Ideally, investors will want to find someone who has the skills and training required to master the many aspects of the financial and investing landscape.  Additionally you will want to find someone who is committed to your success and who will act in your best interests to help you achieve your goals. The seven steps above will assist you in finding the right financial adviser for your unique situation. (For related reading, see: Why the Best Financial Advisor Might Be You .)

More From Investopedia