Investment Professional Selection Tips

Do-it-yourself or get help? This question, a dilemma for many, will occur early and often during the course of your financial life. As your personal finances become more complex, you will inevitably need help from an investment professional. The following tips will help you make an informed selection:

  • Determine your personal finance objectives and think about the services that will meet these objectives. For example, are you saving for retirement, protecting against risk, preparing your estate, or putting money aside for the education of your children? These are just a few of the potential questions that will help determine the financial services you are seeking. Financial services fit into an array of disciplines, including financial planning, estate planning, retirement planning and preparation, tax planning, investment management, college financing and planning, and insurance. Investment professionals may specialize in one discipline or offer services in several areas. Don’t worry if you can’t think of a complete list of financial services to meet your needs, because, after all, this one important reason for getting help.
  • Ask trusted sources like friends and relatives for the names of investment professionals. Keep in mind that everyone’s financial situation is unique, so what is good for your neighbor, may not be good for you.
  • Don’t use titles or generic terms to make your selection. According to the Financial Industry Regulatory Authority (“FINRA”), the largest non-governmental regulator for all securities firms doing business in the United States, titles like Financial Adviser or Financial Planner can be used by investment professionals that may not “hold any specific designation.”
  • Understand professional designations. The list of designations continues to grow, with each one representing something different. FINRA lists almost 100 designations. There are requirements for each designation, so when an adviser lists a credential, ask questions about the meaning of the designation and where to go to verify the designation. For example, to verify the credentials of a purported Certified Financial Planner, visit the Certified Financial Planner Board of Standard’s search page and enter the name of the professional. To understand the meaning of a designation, do a Google keyword web search using the designation title. For example, Google keyword search “CFA” links to the CFA Institute, the organization offering the Chartered Financial Analyst designation.
  • Conduct face-to-face interviews with prospective investment professionals. FINRA suggests the following questions: “areas of specialization, professional designations, registrations or licenses, education, work history, investment experience, products and services, and disciplinary history.” Be sure to ask about compensation, which may be hourly, a flat annual fee, commission based, percentage of assets managed, or a combination of commissions and fees. Ask if the professional or their firm receives additional compensation for selling particular investment products. Finally, in the case of a professional offering investment products, ask if their firm is a member of the Securities Investor Protection Corporation (“SIPC”). According to FINRA, “the SIPC provides limited customer protection if a firm becomes insolvent.”
  • Verify state and federal regulatory registrations of the investment professional and their firm. Ask the prospective professional if they and their firm are registered at the state, federal, or at both the state and federal level and the actual name of these regulatory authorities. Once you have the name of the regulatory authorities, visit them online or call to verify registration. Many investment professionals and their firms are registered by FINRA, so a great place to start is FINRA’s BrokerCheck, “a free online tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers.” In addition, FINRA provides links to state regulatory authorities.
  • Ask for references. Going the extra mile and checking references is worth the effort when considering that you may be entering into a lifelong relationship with the selected investment professional.
  • Make sure the services being offered fit your unique needs and situation. Every investment professional should tailor a solution unique to you and your situation. Beware of professionals offering “one-size-fits-all” services.

Ultimately, selecting an investment professional is your responsibility, so whether you choose to do-it-yourself, or partner with one or many investment professionals, you control your financial destiny.

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