Take Note: This Widely Used Money Method Could Be Crippling Your Finances

While finding a financial adviser is probably not at the top of your to-do list, the benefits can absolutely be worth the additional research. For those who might have questions about how best to save for retirement, what Social Security benefits they can and/or should apply for, or even those who might have complicated tax issues, a financial adviser can be a financial lifesaver. Not to mention investment advisers, which can help you select and manage your stock portfolio long term.

With this in mind, there can be a LOT to know about different financial adviser services (including one red flag in particular that should make you run from certain advisers). Perhaps most importantly, understanding how financial advisers are paid, and what kinds of fees you might be on the hook for when using their services can be a significant factor when it comes to finding the right financial adviser for your needs and your budget. Unlike tax services, which tend to have more up-front and generally agreed upon pricing models, financial advisers can (and do) use a host of different fee tactics depending on what you, as a consumer, are looking for in one.

One of the biggest questions to have in mind before you begin your financial adviser search is what services, exactly, you are looking to get from an adviser. Financial planning can be very different from investment and stock portfolio management, so ensuring you find the right fit for your needs is significant in getting the most out of what financial advisers can offer.

For starters, while there are technically several ways that financial advisers can charge consumers, most usually go with one model, in particular. Easily the most common fee model involves advisers charging a percentage fee based on the amount of money they're responsible for managing for you. This fee is known as a percentage of assets under management, or AUM fee, and it can range from 0.25% to 1% per year. The range in percentages for AUM fee depends entirely on the kind of financial management service you use. For example, automated robo-advisers (which digitally manage your money via algorithms and even AI) usually require substantially less financial outlay than using an actual human adviser does.

With that said, another way that a financial adviser could choose to charge you is hourly, meaning a flat hourly rate based on how much time they actually spend managing your money. Hourly rates can vary, but you can expect to spend at least $200 an hour to upward of $400. Similarly some advisers might opt for a flat annual fee (which can range from $2,000 to $7,500 a year) or even something known as a per-plan fee. This occurs when a financial adviser creates a financial plan for you to then carry out and manage on your own. You can expect an adviser to charge between $1,000 to $3,000 to create this kind of custom financial plan. Another potential option, for investment advisers in particular, is to charge a commission for each recommended investment.

The way a financial adviser charges for their services is a significant factor when determining which adviser might be the best fit for your specific financials. Not only because of the varying costs associated with different advisers, but also because of the potential for bias and even self-serving advice. It's important to consider how your adviser might financially benefit from the advice they give you, and seek out fee structures that allow for the fewest conflicts of interest.

For example, fee-only advisers can offer more unbiased advice than commission-only advisers who earn their income solely from your buying and selling of investments they recommend to you. With that in mind, ensuring you use a flat-fee based adviser could similarly keep your adviser's financial advice more objective than a percentage-based adviser who could earn more on bigger investments or riskier moves.

It is important to also keep in mind that many financial advisers use a combination of different fee types depending on the services they offer. This means you could use a financial adviser that charges specific AUM fees for investment-specific financial advice but sticks to flat fees for more general financial management and planning. Similarly, some advisers might use commission-based fees for investment-specific planning while keeping flat fees for other financial advice.

Making sure you have a solid understanding of the fees charged by your financial adviser is significant when shopping for one. Remember that if a financial adviser is costing you more than they are saving you, they probably aren't worth it. (Check out 10 tips for choosing a financial adviser.)