The financial services industry can be very confusing and intimidating. Many people either stay away or jump in blindly and get fleeced.
So how do you find someone to help and guide you?
Let's start with some titles and designations:
Financial Advisor - a very broad term which translates to someone who can help you with finance and investments.
WMA - Wealth Management Advisor - same as financial advisor but has more snob appeal.
CFP - Certified Financial Planner - a person who has taken many courses and passed a rigorous exam covering all the aspects of personal finance. They have a good grasp of money management and investing.
Stock broker - aka Financial Advisor - this person has passed the Series 7 exam, is register with the SEC (Securities and Exchange Commission) and has a good knowledge of investing.
Let's review how they get paid:
Financial advisor, WMA and stock broker rely essentially on sales. The more they sell you, the more commissions they make. (Both buy and sell orders generate commissions for the broker.) If you are being advised to buy and/or sell often, the only person making money is your broker.
A Fee Only Financial Planner prepares a comprehensive plan for you and your family. It may include buying a home, additional education for you or your spouse, education for your children, taxes and other financial goals leading to retirement. Since this plan takes many hours of gathering information and analysis the planner will charge a substantial fee - somewhere between $1000 to $2500 or more, depending how complicated your situation may be. The planner then sends you to a financial advisor or broker to implement the plan.
Another type of Financial Planner will prepare a less comprehensive plan and implement it for you. The fee for the plan will be covered by the charges for investing. (You don't get the plan for nothing.)
Remember to ask:
"What's this going to cost me? How do you get paid?"
There are ways for you to determine if a broker or investment advisor is a bad apple. Go to BrokerCheck at finra.org website or call the BrokerCheck hotline 800-289-9999. Here you will learn a broker's current license status and history, employment history and any reported regulatory proceedings, disputes and settlements.
(FINRA - the Financial Industry Regulatory Authority is the self-regulator for the securities industry.)
When you work with a financial professional it is important to know the extent of his/her expertise in the various areas of finance. Although they may exhibit a certain level of knowledge, there is no test or regulation for integrity and trust. You must seek a professional who is worthy of your trust and the care of your money.
Be $ Smart - take the time to research and interview financial advisers before you give them your hard earned money.
