When seeking investment or financial advice many people may ask themselves, “Is my adviser putting my interests first?”

This is a common concern many people have today whether they are planning for retirement or are already retired.

There are a few things one should consider before hiring someone to help with their investment or retirement planning.

Some of the first things to consider are whether or not the adviser is licensed, which licenses they hold and how they are paid.

The reason these items are of importance is that the license the adviser holds will determine two things. The investment products that are available that can be legally offered to the client and equally important, whether or not they have a fiduciary or suitability responsibility.

Let’s explore the different types of licenses along with the advantages or disadvantages of each.

First, there are advisers that have just an insurance license and can offer only investment vehicles through an insurance company such as annuities and life insurance. Many times these advisers present themselves as financial or retirement planners, when in reality they are merely insurance agents. This can be misleading to potential clients and the general public.

Some advisers hold a series 6&63 license, which allows them to manage variable annuities and mutual funds.

Then there is a series 7 license, the most common term being, stockbroker. The stockbroker will have a much wider spectrum of investments to offer a potential client. Where the previously mentioned licensed individuals may only offer insurance products or mutual funds a stockbroker (series 7 license) can offer stocks, bonds, exchange traded funds, certificate of deposits, and much more.

The key thing to understand regarding the stockbroker is that they work for what is called a broker-dealer. They work for a particular broker or financial institution and can only offer the products that the institution allows them to offer.

The best way to explain this is: Say, you walk into Bank A and ask for the best CD they have, what are the chances of them instructing you to go across the street to Bank B because they have a CD that is paying half a point more there? If the broker at Bank A did do that, what would the chances be of that individual having a job the next day?

So even though the stockbroker may have a wider choice of investment products to offer, they are still limited and boxed into what that particular institution they work for has to offer. You see the stockbroker has a “suitability” responsibility. This means that if a person walks in and says I would like to put my whole life savings in one of your risky funds. The stock broker’s responsibility would be to tell that individual that they may not be suitable for them to do and they would have to show the client a more diversified approach. It would not be the stockbroker’s responsibility to offer the client an investment product that would be more beneficial to the client at another institution.

Lastly, let’s discuss the Series 65, which is considered a Registered Investment Advisery License. Under this license the adviser does have a wide range of investment vehicles to offer, however the adviser holding this license is held to a higher standard being a “fiduciary” responsibility. A fiduciary responsibility holds the Series 65 holder responsible to have the client’s best interest in mind.

An adviser holding a series 65 license is considered an independent adviser and does not work for a broker-dealer or a financial institution. They work directly for the client. The client is responsible and has the freedom to not only hire but also fire the adviser. Advantages to hiring a Registered Investment Adviser is that they are not limited to offer products that just one particular institution has available. This adviser has the freedom to consider any institution and product that suits the needs of the client best.

Using the same simple example used earlier, if a client now needs a CD, whether the best paying CD is offered at Bank A or Bank B, the adviser holding a series 65 license can put their client in the highest paying CD and will still be paid either way. Same with all other investment vehicles out there, the adviser can shop the products with the different institutions and put their client in the best products available.

Before hiring an adviser, do your research and understand the difference between having a suitability responsibility and fiduciary responsibility.

If the adviser is limited in the scope of investment vehicles they have to offer you, it will be like trying to fit a square peg into a round hole. You will want the adviser to have your best interest in mind.

Finally, make sure you understand what licenses the adviser holds and don’t be afraid to ask them how they are paid. Are they commission based or fee based. These are things they have a responsibility to disclose to you.

Make sure to do your homework; this will help to insure that you are working with an adviser that has your best interests in mind.

Rick Rivera is a partner at Safeguard Investment Advisery Group (www.safeguardinvestment.com) and has more than two decades of experience in the financial industry providing guidance to those planning for retirement. He is an investment adviser representative holding a series 65 license, as well as Life-Only and Accident and Health licenses in California.