How to Choose an Investment Professional
If you are like many investors, you might not always have the time or desire to research potential investments and ask all the questions you need to ask to determine whether a particular product or strategy makes sense for you. If that's the case, you will want to choose an investment professional—such as a broker, investment adviser, accountant, or others—to help you manage your money with confidence.
Which Type of Professional Is Right for Me?
You have a wide array of choices when it comes to investment professionals, including:
- Broker—a person who is in the business of buying and selling securities—stocks, bonds, mutual funds, and certain other investment products. Although they often use such titles as financial consultant, financial adviser, or investment consultant, brokers are primarily securities salespeople.
- Investment Adviser—an individual or company who receives compensation for giving advice about securities to a client. Some investment advisers also manage investment portfolios, while others offer financial planning services or, if they are properly licensed, brokerage services.
- Accountant—a professional who is trained in the field of accounting. Those who work with individuals typically provide advice on tax and financial planning.
- Insurance Agent—a salesperson who can help you obtain life, health, or property insurance policies and other insurance products, such as annuities.
- Financial Planner—a professional who helps you to develop a strategy for managing your money. Financial planners can differ greatly in the quantity and quality of services they provide. Some will examine every aspect of your financial picture—including savings, investments, insurance, taxes, college savings, retirement, and estate planning—and help you develop a detailed strategy for achieving your financial goals. Others, however, will only recommend the products they sell, which may give you a limited range of choices.
Before you choose a particular person, be sure to find out in advance which products and services they can—and cannot—provide, as well as which products and services you will actually receive. Bear in mind that the recommendations you get will typically correspond with the products or services they sell. For example, an insurance agent will tell you about insurance products, such as life insurance and annuities—but likely won't discuss other investments choices, such as stocks, bond, or mutual funds.
How Do I Find an Investment Professional?
One of the best ways to choose an investment professional is to ask family, friends, and colleagues who they recommend. Try to get several names, and then meet with potential investment professionals face-to-face. Be wary of anyone who promotes a one-size-fits-all approach to investing or touts only a particular product.
The following checklist provides key questions to ask:
Training and Qualification:
 What is the highest level of education you completed? Where did you go to school?
What licenses do you hold?
What additional professional qualifications or designations do you have?
Have you ever been charged with wrongdoing or disciplined by a regulator?
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For brokers, any actions by the SEC, FINRA, or a state regulator?
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For insurance agents, any actions by a state insurance commission?
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For accountants, any actions by a state board of accountancy?
Experience and Approach to Investing:
How long have you been in the investment business?
What training and experience do you have?
Where did you work before working for your current firm?
- Why did you leave?
- What is the status of those firms today?
What is your investment philosophy?
How would you describe your typical client?
Can you give me the names and telephone numbers of long term clients?
What products and services do you offer?
Fees and Commissions:
How do you get paid?
What choices do I have on how to pay you?
Do you receive compensation from anyone other than me if I purchase a particular product or service?
- If so, from what source?
- What form does the compensation take (for example, cash or a trip)?
Background on the Firm:
How long has your firm been in business?
Has the firm ever been charged with wrongdoing or disciplined by a regulator?
How Can I Check the Background of an Investment Professional?
One of the smartest moves an investor can make is to thoroughly research the background of his or her investment professionals. With few exceptions, brokers must register with the Securities and Exchange Commission and FINRA. In addition, individual brokers or registered representatives must register with FINRA, pass a qualifying examination, and be licensed by your state securities regulator before they can do business with you. You can obtain background information on firms and individuals—including registration, licensing, and disciplinary history—by using FINRA BrokerCheck or by calling your state securities regulator. You can find your state regulator's number in the government section of your local phone book.
You can learn more about an investment adviser and check whether they are properly registered by reviewing their registration forms, known as "Form ADV." You can access Form ADV by visiting the SEC's Investment Adviser Public Disclosure Web site or by contacting your state securities regulator.
To check out an accountant, call your state's Board of Accountancy. And to check out an insurance agent, call your state's Insurance Commission. Again, you can find contact information for these regulators in the government section of your local phone book. Although no government agency directly oversees financial planners, be sure to search FINRA BrokerCheck and the SEC's Investment Adviser database—and call your state securities regulator—to find out whether the planner has ever been a broker or adviser also and see what information is available.
Conclusion
Ultimately, your goal in trying to find an investment professional is to identify someone you trust who has the experience and skills to help you set realistic financial goals, make sound decisions, and monitor your portfolio. Be sure to thoroughly check out any investment professionals your hire—as well as their firms—before you entrust your hard-earned money to them.
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