Ask What Agency (or Agencies) Oversee Their Business
Every reputable financial planner or advisor is subject to oversight from at least one of two regulatory entities. You need to know which one, so you can confirm their legitimacy. When you ask about which agency provides their oversight, the answer should be either FINRA or the SEC (or a related state-level authority). FINRA stands for the Financial Industry Regulatory Authority. “SEC” stands for the Securities and Exchange Commission.
If the answer is FINRA, the advisor will hold some type of securities license or perhaps several licenses. You can use the BrokerCheck feature on FINRA’s website to see if there are any complaints on file. If the answer is the SEC, you can use the SEC Investment Advisor search feature on the SEC’s website to check out both the advisor and the firm they work for.
If you find any complaints or any other information that doesn’t line up with the advisor’s claims, that should be an immediate red flag for you to continue your search.
Ask Which Professional Designations They Hold
FINRA has a helpful page designed to help you understand the various professional designations that an advisor can hold. On the page, you’ll find each designation complete with a link to the organization that issues the designation. You can use this page to click through to an organization, check to see if the advisor really has the credentials they say they have, and learn more about what those credentials mean. You should look for financial planners that hold the CFP® (certified financial planner) designation. You can verify this directly with the Certified Financial Planner Board of Standards, the certifying agency for all CFPs. Unfortunately, there have been many documented cases where dishonorable folks use credentials they do not have. You don’t want to do business with someone who feels this type of deceit is okay, especially when it comes to something as important as your financial future. There are also other valid advisor credentials that apply to the tax, investment, insurance, and retirement planning fields, such as, respectively, a CPA, CFA, ChFC, and RMA or RICP.
Other Online Resources
You can also use many types of online search engines specific to financial planners, which will only list advisors who have passed a basic background check. This means their credentials have been verified and they don’t have a large number of complaints on file. Most online search engines then allow you to narrow your search by geographic location, areas of expertise, or compensation method. Don’t skimp on these types of background checks. Fifteen to twenty minutes of time spent online is a worthwhile investment when you’re hiring someone to work with your finances.
