A new Securities and Exchange Commission bulletin has been issued with guidelines to investors about the best and safest ways to select a financial advisor – and with your potential business (or lack thereof) in mind, it might be worth taking a look.

Its biggest revelations to individual investors, many of whom may not have any knowledge of the industry, are suggestions to learn how they'll pay for their products and services (as well as how their financial professional will be paid), as well as advice on investigating their credentials and any history of disciplinary action from a regulatory body or a history of customer complaints.

The SEC's five tips include the following:

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1. Do your homework and ask questions – read the documentation provided or ask for documentation, and be sure to ask lots of questions.

2. Find out whether the products and services available are right for you – of the broad range of advice and guidance available by retirement advisors, some may be too complex, and some may not provide enough options for investors with more complicated needs, or more long-reaching financial goals. Most importantly, does the consumer want a hands-on or hands-off relationship with their advisor: Do they want to be given advice each time they make their trades or think about changing investments, or do they want the professional to make those decisions and let them know about them afterwards?

3. Understand how you'll pay for services and products, and how your financial professional gets paid, as well –  will the arrangement for professional services provided come in the form of an hourly fee, an annual or flat-rate-per-project fee, a commission on trades, a load on the amount invested in a mutual fund or a variable annuity, or a mark-up on house products?

The advice gets very clear at this point: "Remember, even if you don't pay the financial professional directly, such as through an annual fee, that person is still getting paid. For example, someone else may be paying the financial professional for selling specific products. However, those payments may be built into the costs you ultimately pay, such as the expenses associated with buing or holding a financial product."

4. Ask about the financial professional's experience and credentials – the "alphabet soup" of credentials associated with people in the financial services industry can be befuddling and, sometimes purposefully aggrandizing. Investors are suggested to actually investigate what separates approved industry credentials and designations from lower-level titles, and to understand that state-issued licenses are considerably different from credentials from unregulated entities.

5. Ask the financial professional if he or she has had a disciplinary history with a government regulator or had customer complaints – doing a background check through FINRA's BrokerCheck website, the SEC's Investment Adviser Public Disclosure database or through state-level regulators is suggested.

There's also a full checklist of questions an enterprising investor can ask up front to clarify the issues that lie ahead:

Expectations of the Relationship

How often should I expect to hear from you?

How often will you review my account or make recommendations to me?

If my investments aren't doing well, will you call me and recommend something else?

If I invest with you, how can I keep track of how well my investments are doing?

Experience and Background 

What experience do you have, especially with people like me? What percentage of your time would you estimate that you spend on people with situations and goals that are similar to mine?

What education have you had that relates to your work?

What professional licenses do you hold? 

Are you registered with the SEC, a state securities regulator, or FINRA?

How long have you done this type of work?

Have you ever been disciplined by a regulator? If yes, what was the problem and how was it resolved? 

Have you had customer complaints? If yes, how many, what were they about, and how were they resolved?

Products

What type of products do you offer?

How many different products do you offer? 

Do you offer "house" products? If so, what types of products are they, and do you receive any incentives for selling these products, or for maintaining them in a customer's account? What kind of incentives are they?

Payments and Fees

Given my situation and what I'm looking for, what is the [best / most cost-effective] way for me to pay for financial services? Why?

What are the fees that I will pay for products and services?

How and when will I see the fees I pay?

Which of those fees will I pay directly (such as a commission on a stock trade) and which are taken directly from the products I own (such as some mutual fund expenses)

How do you get paid?

If I invested $1,000 with you today, approximately how much would you get paid during the following year, based on my investment?

Does someone else (such as a fund company) pay you for offering or selling these products or services?

 

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