Financial Brokers and Advisers
A financial professional can help you reach your financial goals. When selecting a broker or investment adviser, research the person's education and professional history, as well as the firm the person works for. Ask these questions:
- Has the person worked with others who have circumstances similar to yours?
- Do you communicate well with each other? Does the adviser listen to your needs? Will he or she keep you updated on your investments?
- Is the person licensed in your state? Your state securities regulator lists individuals and firms that are registered in your state. You can look these up here: http://www.finra.org/investors/state-securities-regulators. You can also find out how to reach your state securities administrator by visiting http://www.nasaa.org/. Ask whether the regulatory office has any other background information.
- Has the person had any run-ins with regulators or received serious complaints from investors? Call your local state securities administrator or the Securities and Exchange Commission (SEC) via https://www.sec.gov/. Check BrokerCheck at https://brokercheck.finra.org/ to find licensing, employment and disciplinary information.
- How is the person paid? Is it an hourly rate, a flat fee or a commission that depends on the investments you make?
- What are the fees for setting up and servicing your account?
Licenses and Professional Titles
An adviser can have multiple titles and be authorized to provide multiple services, including investment services, financial planning and insurance products. Check the Financial Industry Regulatory Authority's (FINRA's) Professional Designations tool at http://www.finra.org/investors/professional-designations to understand the designations, the educational and ethical requirements to earn them, and the organizations that offer them. The SEC, FINRA and state regulators do not grant or endorse any professional titles. Professional titles are not the same as licenses or registrations. A license is granted by government authorities and offers you legal protection.
Suitability Versus Fiduciary Standards
When you interview potential financial planners, ask if they operate under a suitability or fiduciary standard:
- A suitability standard applies to broker-dealers. This standard requires brokers to evaluate an investment option and determine that it can suit your needs, based on your financial situation. However, they are also concerned about how their recommendations benefit their company financially.
- Fiduciary standard rules apply to investment advisers. This standard requires the adviser to put your best interest first. Advisers must give advice based on detailed and thorough research, and fully disclose all important facts. In addition, they must avoid conflicts of interest, putting your financial interest above their own.
Additional Organizations That Could Be Helpful
- The Commodity Futures Trading Commission's (CFTC's) SmartCheck (http://www.smartcheck.gov/) is a collection of free tools to check the background of financial professionals.
- Both the North American Securities Administrators Association (http://www.nasaa.org/) and the National Futures Association (https://www.nfa.futures.org/) can offer helpful information.
- FINRA (http://www.finra.org/) provides a dispute resolution program among investors, brokers and brokerage firms. Senior investors can call 1-844-57-HELPS (1-844-574-3577) for help with brokers.
- The SEC's Investment Adviser Public Disclosure website, https://adviserinfo.sec.gov/, provides information on a firm or individual's registrations, experience and disciplinary action.
- SaveAndInvest.org offers unbiased information and strategies to help you avoid investment fraud at https://www.saveandinvest.org/.
U.S. General Services Administration (GSA). (2016, January). Investing: Financial brokers and advisors. In Consumer action handbook (p. 35). Retrieved December 14, 2016, from https://www.usa.gov/