There are certainly a lot of financial advisors out there. While most advisors bring integrity and skill to the table, the sad fact is that many of them may not have your best interest at heart. How can you tell which advisor is a good fit for you?? While this is certainly not a complete list, there are a few things we personally feel are important to learn about any advisor you decide to use-things like the necessary licenses to do everything they need to do, a clean compliance record, their method of doing business, and their willingness to let their clients speak to new prospects. Here are some things to review with a potential new advisor:
- A true advisor holds the necessary licenses. Obviously, an insurance license isn't enough. A real advisor will need some sort of license from FINRA. The most common are FINRA Series 6,7, 63, 65, or 66. If an "advisor" only has a Series 6, he is legally limited to only using investment vehicles such as mutual funds and annuities. Why limit yourself-it only makes sense to use the full spectrum of products available. Additionally, if he is managing your money for an advisory fee, he will need to hold the Series 63 and 65 (or the Series 66 which combines these two). Pete has Series 63 and 65 licenses as an RIA. Without these licenses, you will be paying a commission to buy your financial products. Is that what you really want?
- What secrets does your advisor have? All legally required licenses are issued to representatives thru the Financial Industry Regulatory Agency, or FINRA. FINRA has a website where you can do a free background check on any advisor holding a FINRA license. Effective June 6, 2016 all websites for FINRA licensed reps must have a link to their broker check on the first page of their website. Click on it, and get the detailed report, as it will show you the advisor's work history, licenses held, the scores on those license exams, and most importantly any complaint issued against that advisor, regardless of whether they were at fault or not. If they were charged with a securities violation, the results and any penalties will be there for your perusal. If the link isn't there? Well.................
- You should also seek out an advisor who is committed to using the fiduciary standard with their clients rather than the suitability standard. What is the difference? An advisor using the suitability standard merely has to show that the investment recommendation they make is suitable for the client. Let's say two products are suitable for a client. Product A is 90% suitable for the client and but pays $XXX revenue to the advisor. Product B meets 100% of the client's needs, but pays a fraction of the revenue that Product A pays. The suitability standard will allow that advisor to recommend Product A. The fiduciary standard FORCES that advisor to recommend Product B. Which standard would YOU prefer to be dealing with??? Remember that Proverbi Capital Advisors is a registered RIA and is not only committed to, but legally required to serve YOUR best interests in every recommendation.
- Ask lots and lots and lots of questions. Does the advisor have references he can give you? Does the advisor have a Client Bill of Rights? Is he willing to share the actual compensation he will earn from your business? Are the fees to manage your account transparent? There is no question too silly or insignificant when you are talking about your wealth. If it pops into your head, ask it. And ask it again if we don't answer it to you satisfaction.
Use some common sense and trust your gut instinct. It's usually correct!!!