Questions to ask when hiring a financial advisor
Posted on 23 May 2010
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/questions-to-ask-when-hiring-a-financial-advisor
The financial reform bill that passed the U.S. Senate last week doesn’t call for retail securities brokers to adhere to a fiduciary standard of behavior–which makes it that much more important that consumers understand the different types of advisors, how they are paid and what to look out for.
Advisors who are fiduciaries have a legal obligation to put clients’ interests ahead of all else and avoid conflicts of interest.
Advisors with fiduciary responsibility are Registered Investment Advisors. They usually are independent or work for small firms and they’re regulated by the Securities and Exchange Commission (SEC) or by state authorities. (In California, brokers also have fiduciary responsibility.)
Stockbrokers aren’t fiduciaries. Nor are salespeople at banks or insurers. They’re self-regulated by the Financial Industry Regulatory Authority (FINRA), an industry-sponsored group. FINRA requires its reps to recommend investments that are “suitable” for clients-a definition with holes big enough to drive a truck through.
Manisha Thakor points out this week that after the “swan dives in both the housing and stock markets, many individuals are questioning their ability to manage their money on their own. Banks, insurance companies, brokerage houses, and accounting firms are some of the many institutions offering financial advice. With so many choices, however, it can be confusing to figure out who to hire, especially if you are just starting out.”
Manisha offers up four questions you can ask to help find the advisor that’s right for you.
Also see my list of ten questions to ask when you’re interviewing financial planners and advisors.
