How to Check Up on Your Financial Adviser

There is a website where you can find information and out how your financial adviser is registered. It is called Broker Check. The Securities and Exchange Commission (SEC) also has a website to pull out details about Registered Investment Advisers (Investment Advisers Public Disclosure).

The website was first designed for brokers as individuals, and has since been expanded to include Investment Adviser Firms. Although you may use the site to find an adviser … it goes beyond that function since this is a regulatory site … thus, marketing hype is not seen here.

If you begin the search and seek individuals, then you are looking for people who are registered to represent a company and that company’s approved products that the person may sell.

The firms search describes how the firm is structured and where it is registered. For example, I am registered as a firm (CRD# 155213) which brings up a link for California where my firm registration is filed.

A few items to check on what is called their ADV:

Part 1A, Item 5: how many employees the firm has and the type of clients they work with. How fees are charged is disclosed here … if they tell you they are “fee-ONLY,” but their registration says fees AND commissions (called “fee-BASED” in the industry) you may want to move on.

Part 1A, Item 6: identifies other business activities which may give you insight into potential conflicts of interest. If a business is not disclosed here, then they should not be offering you a service they have not disclosed.

Part 1A, Item 11: have they had any past legal trouble?

Part 2 is their brochure with a plain english description of the firm as well as background on each adviser working there. This may be easier to read than the check-the-box approach used in Part 1, however both parts should agree and both parts give a great over view of who you are considering working with.

Advisers are required to give Part 2 of their ADV to their clients each year.

 

You may use Broker Check or the IAPD sites to identify and research someone near where you live. You can also use the CFP® Board of Standards website to find a certified professional near you (Note: these advisers may be fee and/or commission based). For Fee-Only advisers you may use the NAPFA website (Note: these advisers are certified in one or more areas of financial planning).

All advisers you consider working with should be listed on Broker Check. Fee-only advisers would be listed on the NAPFA site and also on the CFP® if they are certified by the CFP® Board of Standards. Fee-only advisers may also be listed on other organization sites if they are certified or chartered by that organization as well.

 

Note: In California you may also verify the status of your tax preparer (look for the Verify link in the left navigation bar once on the site). Other states may or may not require tax preparers to register.

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One Response to How to Check Up on Your Financial Adviser

  1. Larry Frank, Sr. September 15, 2014 at 1:51 pm #

    Once you’ve identified potential advisers … here’s more insight into selecting the right one for you

    http://www.thinkadvisor.com/2014/09/15/7-ways-to-avoid-picking-a-bad-advisor?page_all=1

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