Q. I’m looking for advice on selecting a financial advisor. I am nearing retirement and have many free options through the big investment firms where my various retirement and brokerage accounts are, but I wanted to find someone who would look closely at my particular circumstances. I found someone who met my husband and me at the advisor’s office one evening. The name on the door read “XYZ Accounting” instead of “Joe’s Advisory Service” — obviously these are fake names. I asked about it, and he said they shared office space. He then wanted to meet at my house for the next meeting, which I thought was odd. Then I tried calling his office to reschedule something, and invariably I get an answering service and he calls back on his cell. I thought perhaps it was reasonable to save money on secretarial staff, but I was now a bit put off. Then he finally emailed me, and his email address suggested yet another company name. He then recommended some insurance products, and had to use yet another company name in order to log in to the insurance company and show me an illustration. I’m wary enough that even if this guy may be totally brilliant and completely on the up-and-up, I can’t work with him. How should I check him out to know if he is (1) a scammer or (2) just a guy who wants to sell insurance or (3) a reputable, competent advisor?
A. Great question. You’re very smart to be concerned about this particular “advisor.”
Anyone can hang a shingle and call themselves a financial advisor or financial planner, but that doesn’t mean he or she has what it takes — be it education or ethics — to manage other people’s money.
Finding a competent and qualified advisor isn’t really a hard thing to do.
First, solicit referrals from family, friends, co-workers or from other professionals you trust, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.
“Just like anything else — finding a plumber, electrician, a doctor — other people’s experiences can prove to be very beneficial to you,” Gobo said. “When you finally find a potential financial advisor, you should check him or her out from a quantitative and qualitative perspective.”
On the quantitative side, ask for credentials.
For example, are they a Certified Financial Planner (CFP)? A Chartered Financial Consultant (ChFC)? A Certified Public Accountant (CPA)? A Chartered Financial Analyst (CFA)?
“Each of these designations attest to the fact that the individual has successfully completed course work and exams,” Gobo said.
For example, a CFP has passed the prescribed courses and tests providing core competency in risk management, investments, taxes, retirement and estate planning. And every two years, a CFP must complete continuing education — including ethics — and the advisor agrees to adhere to the standards put forth by the CFP Board of Standards.
You can learn more about the industry’s designations here.
Next, check to see if the individual is licensed to sell investment or insurance products, Gobo said.
If the person has a Series 6, 7, or 63 license, you can use the Broker Check tool from the Financial Industry Regulatory Authority, or FINRA, to see if the advisor has any complaints or violations, and to make sure the license is in good standing, Gobo said.
If the individual sells insurance, check them out with your state’s insurance commissioner.
If the advisor accepts commissions for investments they sell, they must have a broker-dealer, said Stephen Craffen, a chartered financial analyst with Stonegate Wealth Management in Oakland. He said the broker-dealer must be named on all of the advisor’s promotional material, including business cards, typically as “securities offered through XYZ dealer.”
“When you are considering hiring an advisor, it is important to consider what conflicts of interest may exist that could prevent them from providing advice that only benefits you — termed `fiduciary standard,’” Craffen said. “Better advisors are willing to disclose possible sources of conflict; all advisors have some.”
To hire an advisor whose conflicts are not related to the sale of a particular product, you may want to look at the web sites of the National Association of Personal Financial Advisors, or NAPFA, and the Garrett Planning Network.
“Advisors that are a part of those organizations are fee-only, meaning they do not receive commissions,” Craffen said. “While they will still have some conflicts of interest, they will generally review them and will act as a fiduciary in providing advice with the least bias.”
You can also try the Financial Planning Association, another well-respected industry group.
On the qualitative side, Gobo said, the best, brightest and most honest person still has to pass your personal “smell test.”
“Do you have a good feeling about this person? Is this person asking you all the right questions to determine your goals, objectives, time horizon and overall needs, or are they more concerned about selling you something?” Gobo said. “For example, if every solution to every situation is an insurance product, this person’s agenda may be one-sided.”
Bottom line, he said, is that if you see too many red flags, run — don’t walk — to the nearest exit and find someone else.
“You should be able to leave every conversation and every meeting feeling very confident that your advisor has your best interest in mind,” Gobo said.
You can take a look at some well-respected advisors on NJMoneyHelp.com’s Find an Advisor page.
Email your questions to moc.p1548028371leHye1548028371noMJN1548028371@ksA1548028371.