Photo: Flickr / betsyweber
Markets are increasingly volatile and many investors are more risk averse. But they also may need more guidance. Financial security trumps investment growth as the most important goal for many investors. Who should you turn to for help in achieving that goal? Securities broker? Investment adviser? Insurance agent? Accountant?
Finding the right financial professional requires you to focus on your short-term financial needs and long-term financial goals. There is no cookie-cutter approach.
“This is a very personal decision,” said Lori Schock, Director of the Office of Investor Education and Advocacy at the Securities and Exchange Commission. “Do you need someone to do your taxes and help you plan for retirement? Do you need a one-time financial plan? Do you like to do your own research and let someone else just validate and give you a second opinion?”
Advice, however, comes at a price.
“You’re going to pay fees for all of these services, so you want to make sure you know what services you need,” said Schock.
While only you can determine the best financial professional for your needs, the checklist you should use for finding the right one is pretty straightforward.
Here are five tips from a recent Securities and Exchange Commission Investor Bulletin:
Do your homework and ask questions.
A lot of the information you’ll need to make a choice will be in the documents the financial professional can provide you about opening an account or starting a relationship.
You should read them carefully. If you don’t understand something, ask questions until you do. It’s your money and you should feel comfortable asking about it.
Find out whether the products and services available are right for you.
Think about what you might need: Comprehensive financial planning or a one-time financial plan? Ongoing money management or advice on choosing securities? Tax, retirement, college or estate planning? Insurance advice? Or a one-time review?
Ask about what would be available to you and who will be delivering the service. Will the financial professional refer you to an accountant for tax services or are those services provided at the firm?
Understand how you’ll pay and how your financial professional gets paid.
Many firms offer more than one type of account. You may be able to pay for services differently depending on the type of account you choose. You might pay an hourly fee, flat fee, a commission based on securities bought or sold, or a combination.
The SEC also makes this important point: Payments — that ultimately benefit the financial professional — also may be built into the costs you pay in expenses associated with a specific product. While some of these fees may seem small, they can add up and cut into profits you could be making.
Ask about the financial professional’s experience and credentials.
Financial professionals hold different licenses and have a wide range of educational and professional backgrounds. Warning: Don’t accept a professional designation after a name as a badge of knowledge. Know what it means and what it takes to get that designation.
For example, “CFP” stands for “certified financial planner.” As a prerequisite, CFP must hold a bachelor’s degree and at least 3 years of full-time personal financial planning experience.
On the other hand, there are no prerequisites or experience needed for the “CRFA” or “certified retirement financial adviser” designation.
Also, some titles are given by industry groups that are unregulated or subject to standards other than their own. You can look up what a designation means on FINRA’s web site.
Find out if your adviser had a disciplinary history or customer complaints.
Even if a close friend or relative has recommended a financial professional, you should check the person’s background for signs of any potential problems, such as a disciplinary history by a regulator or customer complaints.
The SEC, FINRA, and state securities regulators keep records on the disciplinary history of financial professionals they regulate. Go to www.sec.gov, www.finra.org or the North American Securities Administrators Association, NASAA, web site to check them out.