In this lesson you will learn 💸
- What the two different types of financial advice providers are
- How to find out about the qualifications and reputation of any given advisor
- What the differences between big vs. small advice firms are
There are two types of financial advisors
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Independent Financial Advisors: Independent advisors can advice you on products from any provider throughout the market. They can sell you those products too. They should be able to suggest solutions that are just right for your circumstances and preferences.
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Restricted Financial Advisors: Restricted advisors can only recommend certain products or providers - if they haven't clearly told you what the restrictions are, make sure you ask for more information.
Tip 📌
It’s worth trying to go with a recommendation from friends or family who have successfully used the advisor. If not, it can help to draw up a shortlist of at least three and speak to them all, to get a feel for who you will get on best with.
Make sure they're qualified and registered
In the United States, all financial advisors are regulated by the Financial Industry Regulatory Authority (FINRA). There are different exams provided by FINRA, including:
- Series 6: Investment Company and Variable Contracts Products Representative Qualification Examination (IR)
- Series 7: General Securities Representative Qualification Examination (GS)
Though financial advisors only need a Bachelor's Degree, internships are recommended, and where you intern can determine where you work in the future - as with any job!
Education Requirements
Official FINRA requirements for financial advisors and planners state that a candidate must complete either a CFP-board registered program, or hold one of the following qualifications:
- CPA
- ChFC
- Chartered Life Underwriter (CLU)
- CFA
- Ph.D in business or economics
- Doctor of Business Administration
- Attorney's License
What about 'bad advice'?
If you believe the advice you were given violates the Code of Ethics and Standards of Conduct, you can submit a complaint to the CFP Board's Professional Standards Department. Don't be afraid to ask about their reasoning, their qualifications, or anything else that might be relevant to the information they're giving you.
Big or small?
A big firm is more likely to be able to ride out ups and downs in the market and economic conditions. They will also have more resources for detecting and stopping fraud and protecting your data. But will you get as personal a service as with a local financial advisor who can take a bit more time to understand you? If you prefer a small firm, you should ask how they protect their customers’ data and money, and make sure you’ll be able to get help whenever you need it.
Check out their reputation
Check the financial strength, history and reputation of the bank or institution. Good advisers will list their qualifications and credentials on their website or in their credentials. You can also check the quality of an adviser’s company by looking at the grades rating agencies have given them.
In addition to the CFP Board, there are a few other resources to help you find or check out an advisor:
Your action 📝
How about drawing up a short list of suitable potential advisors for you by checking in with friends, colleagues and relatives, or doing some desktop research, and then assess each one of them in more detail by phoning them up and ideally also meeting them to find the right one for you.