Before you make a major purchase – car, television, refrigerator- most likely you’ve done some extensive research to ensure you are making the right decision. One of the most important decisions that investors make is choosing the right financial planner to work with.

photo credit: paurian

Surprisingly,  more than 70% of all investors do not do a background check on their broker before hiring them.  Say what?

Yes, approximately 1/3 of people that decide to work with a financial planner do not check the background of that person that they are getting ready to hand over their life savings to. With the names of Madoff and Sanford making headlines, it’s even more important to at least double check your advisor’s background.  It may not be a sure all prevention method, but you can easily find out if the advisor has had any prior wrong doings on his or her record.

To show you how how easy it is to get information on a financial advisor, I thought I would do a little experiment.   Today’s experiment is doing a background check on myself.  I’ll show you the different sources you can go to do various background checks and what information to look for.   First things first, the unfortunate thing of me doing this is that I have a bit of confession to make.  My real name (first name) is not Jeff. *Gasp* I know, I know.  You might be shocked.   As you can see if you do a background check on myself, my parents blessed me by naming me Jan Jeffrey Rose.   There is no family history behind the name, it was just one that they liked. Growing up I opted to go by my more masculine middle name, Jeff.   You don’t know how much of a pleasure it is to get phone calls from telemarketers asking for “Mrs. Jan Rose”.  Now that that is out in the open, we’ll continue.   That is a pretty good example of what information you’ll be able to find when doing a little homework on your financial advisor.

*Be sure to click on the video link above to see my news appearance discussing this very topic.

1.  Are they a Certified Financial Planner?

CFP Board Background Info

Before choosing a financial planner, one thing you might want to consider is if they are a Certified Financial Planner™ professional.  Only those who have fulfilled the certification and renewal requirements of CFP Board can display the CFP® certification marks. CFP® practitioners agree to abide by a strict code of professional conduct, known as CFP Board’s Code of Ethics and Professional Responsibility, that sets forth their ethical responsibilities to the public, clients and employers.  By going to the CFP.net website, you can use their search tool to find out if the planner has had any disciplinary actions against them.    As you can see with me, I’m squeaky clean.  I would like to thank the CFP board for allowing to abbreviate my first name with an initial 

2. FINRA Broker Check®

A financial advisor that is considered to be a registered representative is regulated by FINRA (Financial Industry Regulatory Authority).  Typically if the advisor works for a brokerage firm, they will be regulated by FINRA.  I’m considered to be a dually registered representative since I both hold my Series 7 and 66 licenses which means I fall under FINRA’s rule.   To help investors keep tabs on financial advisors, they developed a service called FINRA BrokerCheck®.  All you need is the person’s name and you’ll soon have all the background information of the advisor available to you in a PDF format.   I was really quite impressed on the amount of information that they provide.  For my report it listed the following:

• Previous firm that I was licensed with (A.G. Edwards & Sons)
• Any disciplinary actions that had been filed against me (once again – none)
• States that I’m licensed to transact business in
• Industry exams that I’ve passed (Series 7 and 66)
• All my previous employment history (I forgot I worked at Gadzooks!)
• Outside Affiliations- this will show if the advisor is involved with any outside business activities.  (As you can see on mine, I had listed my revenue from my Google Adsense)

3. Securities Exchange Commission- Investment Adviser Search

This is where the term Registered Investment Advisor (RIA) comes into play.  People or firms that get paid to give advice about investing in securities generally must register with either the SEC or the state securities agency where they have their principal place of business. Investment advisers who manage $25 million or more in client assets generally must register with the SEC. If they manage less than $25 million, they generally must register with the state securities agency in the state where they have their principal place of business.  I hate to use this an example, but good ol’ Bernie Madoff is was an investment advisor.   That’s why the SEC has taken a lot of heat over the matter.   Since I’m a registered rep, my parent firm LPL Financial falls under the SEC’s watch (as well as FINRA’s).   The only information that I could find on the SEC’s site was for my firm alone (as shown above).   If you do decided to work with a RIA, this would be your resource to do some investigating.  If they are a smaller outfit, you can check with the state regulator’s.  One source is the North American Securities Administrators Association.  The NASAA has helped in preventing investors from being subject to fraud for over one hundred years.

4. Advisor Check

Check Before You Invest

Ready, Set, Go!

Whenever I first talk to somebody that is interested in utilizing my services, I often get recurring questions into how the whole process works.  Some of the most common questions are, “How much is this going to cost?”  or “What can you do for me?”  For those that have never sat down with a financial planner before, I wanted to share an example of how a first meeting might go.

First Financial Planning Meeting

First and foremost, I do not charge anything to meet with somebody for the first time.  The first meeting is solely an interview for both parties.   I’m interviewing you to see if you are a right candidate for my financial planning process.  You are also interviewing me to see if I’m the right man for the job.  A casual sit down face to face meeting will help both of us answer this question.

Information To Bring

Typically, I will talk to the potential client and instruct them on the type of materials that they would need to get together for our first meeting.  This would include:

It never hurts to have too much information.  If feasible, I like to meet in my office, but a house visit is nothing out of the ordinary.  Actually, sometimes it’s nice to go to the home so that all the paperwork is already there and easily pulled from a file if it was initially forgotten.

Let’s Talk

The first part of the meeting is getting to know each other.  Kind of like an informal interview process to see if there is anything that I can bring to the table to better their situation.  It also works the other way in that they are interviewing me to make sure that I am the right guy to help out with their investments.  Hopefully, I make a good impression.    One of my best qualities is that I’m a naturally curious person.  I always like to find out what’s  “their story”.  Where did they come from?  Where have they worked? What do they do for fun?  What’s the best place they ever visited?  What was their first job?  It’s always interesting to find out what got that person to where they are today.

Down To Business

Then we’ll discuss their investment situation.  What’s working for them now?  Any investments that didn’t work out in the past? What do they like or dislike about their current situation? Have they ever worked with a financial planner in the past? This will ultimately lead into a discussion of what they need their investments to do for them: Fund their retirement goals. Buy a vacation home.  Pay for their daughter’s college, etc.

Crunching The Numbers

I will then take their investment information and head back to the office where I will input it into a tool to where I can analyze their portfolio to make sure they are maximizing their full potential.  Often times, people are not diversified enough or some of their current investments are lacking in performance. We will then schedule a second meeting to go over my recommendations to see where we might be able make some adjustments to put them in a better situation.

Overall, the first meeting is the most fun because I enjoy to meet new people.  I could listen for hours of people telling me all their life experiences.  That’s what makes starting the financial planning process such unique and enjoyable experience.

Securities offered through LPL Financial, Member FINRA/SIPC

For those of you that have actually built your own home or been in the process of building your own home, you know the hours and hours it takes in the planning process. Most often or not, this is the home that you will either retire in or live a great majority of your life. Within the planning process you will scrutinize over your house plans and keep in constant contact with your contractor to make sure that your “Dream Home” is being built to your standard. And this is how it should be, because you will be in that home for a good portion of your life. What’s most puzzling in my profession is that people spend very little time planning for retirement.

Most Important: Vacation or Retirement?

In fact, I just read a study that said on average people spend more time planning their annual vacation than they do actually planning their retirement. Think about that for a second. What’s most important: Disney World or supporting yourself and family for 20-30 years?

Disney Land

VS.

Happy Retirement

Starting Your Financial Plan

Building your dream financial plan is similar into building your home. It does take some time into getting the information together, but shouldn’t any plan that will last 2 to 3 decades? In the process, I will be the contractor that puts everything together and continually monitors to make sure your plan is still working. We will make sure that we have all the proper materials and use them the most effective way possible to get you the retirement plan of your dreams. The best part is that I won’t avoid your phone calls and will even return your call promptly. When’s the last time you heard a contractor say that? Well, at least say it and then mean it.

Blueprint for the Financial Plan

The financial plan will be the blueprint that we will review each year to make sure we are still on track to get us where we want to go. As house plans change, so does life; so we want to make those changes accordingly to keep us on course.

Spending a little time to review your situation and meeting with a certified financial planner can be what makes all the difference in a successful retirement. Don’t let a few hours not spent ruin your financial dreams.

“Good plans shape good decisions. That’s why good planning helps to make elusive dreams come true.”

- Lester Robert Bittel (b. 1918), writer

In this day and age, professionals are laden with the alphabet after their names.  My industry is no exception.  When I started my career with my previous firm, we immediately acquired the AAMS (Accredited Asset Managment Specialist) Designation.  While serving in Iraq, in my downtime I studied for the CRPC (CharteredRetirement Planning Consultant).  These are just two of several designations that I could attain if I had the time and patience to study for them.  But despite the two I had, and several I could get: the coveted marks I knew I had to have was the mark of the CFP®.

What Makes a CFP® Different?

From my perspective, the CFP® was the mark of a serious financial planner.  With countless financial consultants at other investment firms, inusrance agents offering investments and banks now having in house brokerages, I knew I needed to differentiate myself.  Many people I know are not familiar with the CFP® mark, so I wanted to share what I had to go through to get it.

Financial professionals who have earned the right to use the CFP® mark have met the following requirements:

Education: There are three ways to meet the CFP® certification education requirement:

1. Completing an education program at a college or university whose curriculum is registered with the CFP Board; or
2. Submitting a transcript of previous financial planning-related course work to the CFP Board for review and credit; or
   Showing the attainment of certain professional designations or academic degrees.
3. Examination: Individuals must pass a rigorous two-day, 10-hour CFP® Certification Examination administered by the CFP Board that covers the financial planning process and includes such topics as tax planning, employee benefits and retirement planning, estate planning, investment management and insurance.

Experience: Candidates for CFP® certification must prove they have experience in the financial planning process before being authorized to use the CFP marks.
Ethics: As a final step to certification, CFP® practitioners agree to abide by a strict code of professional conduct, known as CFP® Board’s Code of Ethics and Professional Responsibility, that sets forth their ethical responsibilities to the public, clients and employers. CFP® Board also performs a background check during this process, and each individual must disclose any investigations or legal proceedings related to their professional or business conduct. Candidates must also adhere to the CFP Board’s Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.