How To Choose A Financial Adviser
This is a guest post from Jeff Rose. Mr. Rose is an Illinois Certified Financial Planner and co-founder of Alliance Investment Planning Group. He is also the author of Good Financial Cents, a financial planning and investment blog. You can also learn more about Jeff at his website Jeff Rose Financial.
If you are in the market for a financial adviser, the process can be daunting especially if you have never worked with one before. Extremely important is finding someone you can trust. How do you avoid the Bernie Madoffs and the Allen Stanfords? . Given recent headlines about Ponzi schemes and fraud, you may be wondering – how can you avoid getting duped by an unscrupulous financial advisor? The key is being better informed and doing some homework. Here’s some tips on helping you choose the right financial adviser for you.
Do a Background Check
It’s amazing the percentage of people that don’t do a background check on a financial advisor before they hire them. If you want to check out an investment advisory firm, visit the SEC’s website. That is the website at which the Securities and Exchange Commission keeps Form ADVs – the forms which reveal disciplinary actions taken against that advisory firm and/or its key employees. You can also make sure a firm is properly registered there.
If you want to check up on a specific investment adviser, go to the FINRA BrokerCheck website tool. Here you can learn about the professional backgrounds of advisers and firms through the Financial Industry Regulatory Authority.
Now that we’ve mentioned that, let’s accentuate the positive. Visit the websites of the Financial Planning Association and the National Association of Personal Financial Advisors. Search functions on both sites will allow you to find a respected independent financial adviser near you.
Lean Towards Independence
Well, when you search for an independent adviser, you have a better chance of finding someone who gets paid for their advice and/or their fee-based asset management, instead of deriving the bulk of their income from trades or product sales. Many of these independent advisors set flat or hourly fees for specific services. Some earn a fee that corresponds to a small percentage of the invested assets they manage for you. If your portfolio does well, they do well.
Alphabet Soup
In fact, this article is a good starting point: investopedia.com/articles/01/101001.asp. This explains the most respected financial services industry credentials and what it takes to earn them. These designations signify advisors committed to upholding ethical as well as professional standards.
In the summer of 2009, there were more than 60,000 CERTIFIED FINANCIAL PLANNER™ certificants. In an average year, the Certified Financial Planner Board of Standards, Inc. conducts about 80 ethics code investigations. This means 99.9% of CFP® practitioners are abiding by the Board’s ethical and behavioral standards. You can visit cfp.net to check that a financial planner has maintained the designation (and you can also learn if they have been publicly disciplined). Here’s what it takes to become a CERTIFIED FINANCIAL PLANNER™ .
Communication is Vital
A good and conscientious financial advisor will meet with you at regular intervals and assist you to adjust your financial strategy in response to life changes and changing objectives. He or she will communicate with you in a forthright, open way – and that includes returning your calls or e-mails within 24 hours.
Your advisor should not communicate with you once every six or seven years, or “disappear” six months or a year after helping you invest. (No one wants to call their advisor only to find out that their Roth IRA or portfolio has become a “house account”.)
