Your Finance: Picking a financial adviser

A true fiduciary is required to put the interests of a client ahead of the fiduciary's own interests.

Today, many brokers don't actually have to do that -- they simply have to make recommendations that are suitable for clients, even if they put more money in the broker's pocket than the client ends up with.

The U.S. Securities and Exchange Commission has been considering writing a rule that would require anyone providing personalized investment advice to retail customers to meet a fiduciary standard. The Securities Industry and Financial Markets Association, a trade group representing the nation's largest brokerage firms, is on record as saying it supports a standard that would require brokers to act in the best interest of clients. But it does not support the most stringent proposals, such as those that could limit the ability of commission-earning brokers to provide retirement advice.In the meantime, brokers and fee-only financial advisers are trying to win and keep clients who have trillions of dollars in retirement assets and want help managing them. Those clients are on their own to determine whether the adviser they are using is putting them first and serving their best interests. Here are a few ways to make sure your adviser -- whether a broker, fee-only financial planner, or any other type -- is a keeper.

Your adviser explains everything to you in a way that you can understand. He or she clearly lays out the investment strategy and how much you are paying for the advice and how much you are paying for the products that are recommended.

Your adviser never tells you that things are too hard for you to understand or that you've asked a silly question, nor does your adviser ever make you feel that way.

Your adviser doesn't describe himself or herself as "fee-based" without explaining specifically what that means. It is a term of art. "Fee only" means the adviser doesn't get paid to sell products -- you pay for unconflicted advice.

"Commissioned" and "free planning" mean that the broker is being paid to sell you products, so the plan may be skewed by the products he or she is paid to sell.

"Fee-based" doesn't mean anything specific -- it usually means the adviser will charge the fee and may also be compensated to sell you products.

Sometimes, it just means that the adviser has switched to a fee-only model, but still gets old commissions on products he sold back when he was a broker.

Your adviser puts you in investments that are inexpensive and high-performing. That is what you hire him for, right? It may not be fair to ask your adviser why she isn't beating the Standard & Poor's 500 index, up 26.6 percent this year, if you also own bonds and foreign stocks and real estate.

But look at the portion of your investments that your adviser has in a big company U.S. stock fund. Compare the annual return and fees (reported as "expense ratios") of that fund with an inexpensive index fund or exchange traded fund, like State Street's SP 500 ETF, with a year-to-date return of around 25 percent and an expense ratio of 0.09 percent.

Not every investment will be that cheap. But monitoring how your adviser treats this basic and broadly held category is a good way to observe how she treats your wallet generally.

Your adviser offers you an investment strategy that makes sense in the context of your financial goals and in the context of your own personality.

For instance, if you're the type of person who is afraid to take any risks, you can expect to earn less in your portfolio, and you can't blame your adviser for that.

Your adviser knows your tax rate and your tax situation. Lots of investment decisions ride on your tax bracket. If your adviser hasn't asked this question, she isn't serving you as well as she could be.

Your adviser keeps your money safe. Your money should be held at a bona fide brokerage firm insured by the Securities Investor Protection Corp. That way, you'll get statements that show you that your funds are tucked away safely.