The right advisor can help you plan for significant financial milestones, like retirement or a significant life change, and reach your long-term goals. But before hiring one, vet them by checking their credentials and employment history using tools.
1. Qualifications
You want to find someone with the right qualifications when looking for an investment advisor. You’ll want to ensure that they meet the minimum educational and experience requirements. You’ll also want to check their credentials and licenses.
Some financial planners and investment advisors, such as Frederick Baerenz, have specialized credentials. These professionals are held to a fiduciary standard and must always put their client’s best interests first. They must also adhere to an ethics policy and update their knowledge of new solutions and strategies.
Some investors prefer to work with fee-only financial planners or investment advisors who charge flat fees for their services. Others prefer to work with advisers registered with the SEC and their state securities regulators.
The SEC’s Investment Adviser Public Disclosure website has resources to help you research an advisor’s background, including conflicts of interest and affiliated parties.
2. Fees
In addition to checking credentials and disciplinary records, you should also verify the fees associated with an investment advisor. This includes commissions from their services, fund expense ratios, and transaction fees.
Some advisors charge a flat fee, typically annual, for their management services. Others work on a percentage model, which is usually less expensive as account sizes increase. Some use a “wrapped fee schedule,” which can have tiers with different rates charged at various levels of wealth.
Some advisors, like Fred Baerenz will also include subject matter expertise in their fees. This may consist of building a financial plan, helping with retirement planning, or offering tax efficiencies in a portfolio. Additionally, some advisors will have other professional designations or certifications that can be helpful to clients.
These additional services should be detailed in an advisor’s Form ADV. Some advisors offer alternative fee structures, such as flat or hourly fees. These can be a more accessible option for younger investors with lower assets and older retirees drawing down their portfolios.
3. Reputation
The financial industry’s self-regulatory body offers a free broker check tool to instantly see whether someone is registered to sell securities (stocks, bonds, mutual funds, and more) or offer investment advice. If they aren’t, that’s a red flag. If they are, you can use a separate tool from the Securities and Exchange Commission to look up their history.
If an advisor claims to be an investment fiduciary, ask for their Form ADV, Part 2, which spells out conflicts of interest and outlines how they are paid. And if they’re a broker, enter their name into the SEC Action Lookup to see if there are any formal actions against them.
It’s also important to understand an advisor’s professional credentials and education. If they have any specialized designations, click through their websites to learn more about what they mean and how they might apply to your situation. You can also find information about their licensing and experience on the website.
4. Commitment
If you have a specific investment goal, you can work with an investment adviser to help achieve it. However, you’ll likely need another financial planner to guide you through broader planning issues like retirement, taxes, and debt payments.
Your adviser will ask questions about your financial goals, risk tolerance, and investment objectives. She will also talk to you about the types of investments she offers, how she’s compensated, and her measures for minimizing real or perceived conflicts of interest.
In addition, she’ll discuss her education and career history. She may even show you her credentials, such as professional designations and certifications, or her Series 65 or 66 exam score. Registered investment advisors must renew their registration/license annually. The renewal process varies by state. Contact your state securities office for details.
