While many people choose to go it alone when it comes to investing, others choose to work with financial advisors. Unfortunately, there are many cases where the financial advisor, broker, investment advisor, financial coach, portfolio manager, or certified financial planner does not have your best interest at heart. Here’s how to ensure that the financial professional you hire is working based on your best interests, not theirs.

 

Check Their Registrations

There are many people out there who call themselves financial advisors but have no credentials. Any person who gives investment advice must be registered as an investment advisor through the state or with the U.S. Securities and Exchange Commission. Here’s the link to check if the investment professional is registered with the U.S. Securities and Exchange Commission:

https://www.sec.gov/check-your-investment-professional. You can also visit your state securities regulator to learn more about the credentials of an individual or firm.

 

Another helpful site is BrokerCheck by FINRA to learn if a person or firm is registered to sell securities and find brokers who have been barred by FINRA. The site also allows you to find formal actions that the U.S. Securities and Exchange Commission have taken against individuals.  Here’s the link to FINRA: https://brokercheck.finra.org/.

 

Determine Their Fiduciary Duty

Many advisors are salespeople and do not have your interests in mind. However, there are advisors who have a fiduciary duty to their clients, and this means that they have to focus on your interests. It is imperative to always work with a registered and licensed fiduciary and one who works based on a fee as opposed to commissions. Certified financial planners have a fiduciary duty to their clients.

 

Find Out How the Advisor Is Paid

Some financial professionals might be motivated to steer you towards investments that they make money from. It’s preferable to find a professional who works on a fee-only basis which means that they do not receive compensation or payments from fund providers and they act as a fiduciary. The fee-only professional is different than a fee-based professional because the fee-based professional is paid by the clients and other sources such as commissions. The fee-based professional only has to sell what is suitable for their clients, which to some means that the standard is lower in terms of your best interest.

 

Make Sure That the Advisor Fits with Your Needs

Even when you have verified that a financial professional is registered and how they are paid, there is still some work to do. It’s imperative that you find an advisor who fits your needs as some financial advisors have specialties. Moreover, some financial advisors might focus on strategies that are not compatible with your goals or financial situation. Make sure that the person you choose is a great fit for you. This might require interviewing several financial professionals before deciding who to hire.