6 Sure-fire Ways Avoid Hiring a Bogus Financial Advisor
The choppy waters of the world of investing are not for the fainthearted. You will require a seasoned financial advisor to help you navigate through the multitude of account options, investments, and insurance. Unfortunately, finding a good advisor is no walk in the park. You need one with the requisite experience and depth of knowledge. You surely wouldn’t want to hand over your money to a charlatan who has led scores of customers into bankruptcy.
So, how do you avoid falling into this trap? Below we explore the 6 ways to avoid hiring a bogus financial advisor.
- Check Out Their Credentials
Wondering how to choose a financial advisor? Ignore the silly alphabet soup of titles appearing on their business card, impressive as they might seem. Do some background research on the prospective financial advisor’s credentials by using FINRA professional designation checker. FINRA is short for “Financial Industry Regulatory Authority.
Each of the credentials includes a brief description of the issuing organization, qualification and educational requirements, and accreditation information. You will be able to tell whether studies are carried out in classroom or online, and exactly how long it should take.
Use FINRA to determine:
- The industry exams they passed
- Any disciplinary action that has been taken against them
- Their employment history over the last 10 years
- States in which they’re allowed to operate
- Other business interests they may have. This helps with situations where they want you to invest in ventures where they have a stake.
- Check Out the Agency That Oversees Their Business
A financial advisor in the US is either regulated by FINRA or SEC. SEC is short for Securities and Exchange Commission. If they’re under FINRA, you can use the BrokerCheck feature on their website to check for complaints made against them. If they’re under the SEC, then you can use their Investment Advisor search feature.
- Check Them Out on Social Media
Start off by Googling their name. If you’re lucky, their social media profiles will pop up. Check them out on Facebook and Twitter. Does what they post resonate with you? Are they the kind of person you’d like to work with? Check out LinkedIn for any recommendations.
- Fiduciary Duty
Find out whether the advisor has a fiduciary duty to you. This simply means that they’ve legally put your interests above their own. Professionals who are not fiduciaries are held to a lower standard referred to as sustainability standard. This means that they can sell you anything deemed suitable for you, which may not necessarily be in your best interest. The consequence of this kind of arrangement is that they can sign you up to an expensive investment with high fees where they’re paid a higher commission when they could opt for better, and less expensive options. Do not work with a financial advisor who is not a fiduciary.
Ask people you trust to refer you to financial advisors they have worked with successfully. Alternatively, if you’ve already narrowed down your search to a few service providers, talk to people who have worked with them. A bad reputation is a deal breaker in more ways than one. This is how to choose a financial advisor.