You might turn to a financial specialist to grow wealth, help with business planning, or protect your investments. These experts do many things well.
Financial planners and advisors are supposed to be money experts. They should have the knowledge and expertise to help you make smarter financial decisions.
Unfortunately, while many financial experts adhere to ethical principles, some don’t. For some, the way they receive compensation incentivizes them to sell you investments in their best interests, not yours.
There are many qualified financial advisors and planners out there. The unqualified leave some tell-tale signs.
Read this before you type “financial planning near me” into your search browser. It can help you find a financial specialist you know you can trust.
How to Search
With so many types of financial specialists, who do you search for?
Some finance gurus deal specifically with investments, others with retirement. Who you search for largely depends on what you’re trying to accomplish.
- Financial planners typically look at your whole financial picture and advise you on it. They focus on what’s best for you in the long term. While financial planning encompasses a wide range of skills, some planners specialize in specific areas.
- Financial advisors generally focus on helping you with investing. Their purpose is more short-term.
Sometimes, the duties of financial advisors and planners overlap. Most people want a financial planner or advisor who can both give advice and buy/sell investments on their behalf.
Both planners and advisors can have various backgrounds and a wide range of services. They might be certified public accountants, insurance agents, investment advisors, or brokers.
Some consider your entire financial picture and help you develop a comprehensive plan to achieve your goals. Others focus on key areas, like investing. It’s best to start a search knowing what you want or need.
It’s also helpful to know that some are salespeople. They only recommend the products they sell, offering you limited choices.
And then, there are the ones out to make the most money for themselves without any ethical principles. How can you spot those?
The first rule is to validate their credentials.
Look for Credentials
Financial planners or advisors must have a Series 7 license to sell securities. That’s a General Securities Registered Representative license.
Also, look for Series 66 or Series 63 and 65 licenses. Any of these licenses mean they took and passed exams qualifying them to advise.
Having ‘CFP’ to their name is a plus. The certified financial planner (CFP) designation means they have at least three years of experience and have undergone rigorous testing.
It’s a good idea to check FINRA’s BrokerCheck website (or call 800-289-9999) to determine if the professionals you’re considering are qualified to give advice and buy/sell investments for you. Also, visit the SEC’s Investment Adviser Public Disclosure (IAPD) website and contact your state securities regulator.
*FINRA stands for the Financial Industry Regulation Authority. Authorized by Congress, they protect American investors like you. They oversee the more than 624,000 U.S. brokers, ensuring they operate honestly and fairly.
*SEC stands for Securities and Exchange Commission. They oversee securities markets and protect investors.
Tell-Tale Signs to Watch for on Your Statements
Make a habit of looking over financial statements when you receive them. Watch for these hints that something’s not quite right.
It’s Not Only Your Name on the Account
Only your name should be on your investment account, not your advisor’s, even if your financial planner is the custodian of your account. Having them put their name on your account is called commingling and is a CFP and SEC violation.
A ‘Meh’ Investment
Buyer beware. If your financial planner/advisor convinces you to buy something based on its high return and low risk, but your returns remain consistent, something may be amiss. It could be a Ponzi scheme that uses newer investors’ money to pay older investors.
Many Ponzi scheme investments involve unregistered firms. Confirm that your advisors, their firms, and your investments are registered with the SEC.
Lots of Account Activity
A high number of trades on your statement is a red flag, especially without a corresponding increase in value. It could be what’s called churning.
Some financial advisors are paid on commission–they only earn money when they buy or sell securities. These advisors, usually brokers, trade more to increase their pay.
Avoid this by choosing a planner who won’t be incentivized to keep moving your money around. Choose an expert who charges a flat fee. A brokerage firm may call this a wrap account fee.
Power
You are the best-suited to make financial decisions that feel right for you. If your planner asks you for Power of Attorney or coaches you to take a back seat to your finances while they run the show, they are asking for too much power.
Don’t put yourself at risk. Power of Attorney for your planner allows them to put money into any account they want (like their own).
If your circumstances require you to grant your advisor power of attorney, stipulate in the agreement that they are not allowed to trade your securities without notifying you. They should never have the right to move assets from their original account or draw on them.
Protect your investments. Don’t unquestioningly trust anyone with your money. Once again, validate your financial advisor’s credentials, background, and ethics record.
Risk vs. Reward
Trusting another person with your money can be risky. Not everyone claiming to be a financial planner or advisor has the right skills and ethical standards. Not everyone has your best interest at heart.
However, many accounting firms in Charlotte, NC, treat your wealth with care and respect. You don’t have to look far to find someone who can help you grow, manage, and keep your hard-earned money. Now you know what to watch out for in an advisor, you have the power to find a financial professional that can help you achieve your goals.
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