posted on 03 September 2016
from the Securities and Exchange Commission
Choosing a financial professional is an important decision. This updated Investor Bulletin provides a few key tips to help you make a well-informed choice. A number of questions you should consider asking before you hire a financial professional are listed at the end of this Bulletin.
Should you have any questions for us, feel free to call our toll-free investor assistance line at 1-800-SEC-0330 or use our online question web form athttps://www.sec.gov/oiea/QuestionsAndComments.html.
Tip 1. Make sure the financial professional is licensed.
Always check the background of any financial professional on Investor.gov to make sure the person is licensed. Unlicensed, unregistered persons commit much of the investment fraud in the United States. You can perform a quick - and free - search through Investor.gov.
Tip 2. Find out if the products and services available are right for you.
Financial professionals offer a range of financial and investment services such as advice on choosing securities and purchasing and selling securities.
Just as a grocery store offers more products than a convenience store, some financial professionals offer a wide range of products or services, while others offer a more limited selection. Think about what you might need, and ask about what would be available to you. For example, do you want or need:
Tip 3. Understand how you'll pay for services and products, and how your financial professional gets paid as well.
Many firms offer more than one type of account. You may be able to pay for services differently depending on the type of account you choose. For example, you might pay:
Depending on what services you want and on the financial services firm in question, one type of account may cost you less than another. Ask about what alternatives make sense for you. And remember: even if you don't pay the financial professional directly, such as through an annual fee, that person is still getting paid. For example, someone else may be paying the financial professional for selling specific products. However, those payments may be built into the costs you ultimately pay, such as the expenses associated with buying or holding a financial product.
While some of these fees may seem small, it is important to keep in mind that they can add up, and in the end take away from the profits you otherwise could be making from your investments.
Tip 4. Ask about the financial professional's experience and credentials.
Financial professionals hold different licenses. For example, financial professionals who are representatives of broker-dealers must take an exam to hold a license, while state regulators often require representatives of investment advisers to hold certain licenses. Financial professionals also have a wide range of educational and professional backgrounds. They may also have certain designations after their names, which are titles given by industry groups that themselves are not regulated or subject to standards other than their own. If a financial professional has an industry designation, like "CFA," you can look up what it stands for usingFINRA's Professional Designations page. Don't accept a professional designation as a badge of knowledge without knowing what it means, and Beware of False or Exaggerated Credentials.
Tip 5. Ask the financial professional if he or she has had a disciplinary history with a government regulator or had customer complaints.
Some Key Questions for Hiring a Financial Professional
Expectations of the Relationship
Experience and Background
Payments and Fees
For additional information, see the SEC's website for individual investors, Investor.gov, and these resources:
SEC Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio
SEC Publication: Protect Your Money: Check out Brokers and Investment Advisers
FINRA Publication: Selecting Investment Professionals
National Association of Personal Financial Advisers Publication: Pursuit of a Financial Adviser: Field Guide
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.
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