Choosing a professional to help you with your finances is a big decision. Remember that you are selecting someone who is going to be privy to your wealth and how you manage your money. A wrong choice could impact not only your finances now but your future as well. It has the potential to ruin your life since the detrimental effects of wrong advice are not easily undone.
This is why you should put time and effort when selecting a finance professional. The first thing you should know when getting their help is to know exactly the kind of professional you need. There are brokers, investment advisers, accountants, lawyers, insurance agents and financial planners. Depending on the kind of training they have obtained, a professional can hold two or more designations at the same time.
Let’s look at them in more detail in the sections that follow.
Kinds of Finance Professionals
Brokers are technically known as registered representatives. They work for broker-dealers which are individuals or firms who are in the business of buying and selling securities. Although some label them as people who buy and sell stocks, they actually dabble in securities or stocks, bonds, mutual funds and various other investment products.
Broker-dealers need to be registered with the Securities and Exchange Commission while their registered representatives must be registered with the FINRA. In order to check if a broker-dealer and registered representatives are licensed, you can check with the website of FINRA or call them up at (800) 289-9999. You may also get in touch with the securities regulator in your state.
There are two kinds of broker-dealers: Full service and discount brokers. Full service brokers provide complete investment planning services and advice but are more expensive while discount broker simply facilitate the transaction and don’t offer any investment advice. Their advantage is that they are cheaper.
Take note that registered representatives who pass the Series 6 exam can offer mutual funds, variable annuities and the like while Series 7 license holders may be able to sell more securities. Brokers take into consideration your income, objectives, financial situation and risk tolerance, among other factors, when offering you a security.
2. Investment Advisers
Investment advisers are also known as asset managers, investment counselors, portfolio managers and wealth managers. They are individuals or firms registered with the Securities and Exchange Commission or the securities regulator of a state that can provide securities advice to clients. Take note that they are not financial advisers or brokers who handle securities transactions. Rather, they provide tailored investment advice to clients and even manage their investment portfolios. Those who are licensed to do so, however, may provide brokerage services and financial planning services.
Investment advisers who have client assets of $110 million or more are managed by the SEC while those who have less are under the jurisdiction of the securities regulator in the state where they primarily do business.
Accountants offer professional assistance to clients primarily in the field of taxes. They help individuals and clients determine how their financial decisions will affect their tax liabilities. They handle financial planning, tax reporting and auditing, among others. They also prepare annual tax returns. If they are certified by the American Institute of Certified Public Accountants (AICPA) as Personal Finance Specialists (PFS), they help clients assess their financial situation, come up with a spending plan, set savings and investment goals and track their progress.
Accountants need to hold a bachelor’s degree in accountancy. Before they can be Certified Public Accountants (CPAs), they also need to pass a national exam provided by the AICPA and meet other requirements set forth by the state Board of Accountancy where they will be doing business. You can check in the AICPA website or your state board if an accountant is a licensed CPA.
There are different kinds of lawyers and as you may already know, their main task is to provide clients with legal advice. Tax lawyers help you understand the legal implications of tax-related decisions while estate planning attorneys specialize in helping you navigate the complex world of leaving your assets to your heirs. They help you in making wills, living wills, power of attorney and health proxy.
Before lawyers can practice law in their respective states, they should pass the bar exam. You can find if a lawyer has a license to practice in your state by checking out the website of the American Bar Association.
5. Insurance Agents
Insurance agents or insurance salespersons are those who offer various types of insurance products to clients. Examples of insurance policies that they sell are life, health and property insurance policies. Insurance agents and insurance firms are licensed by the insurance commission that operates in each state. If the agent offers variable annuity contracts or similar securities, they should also be licensed as registered representatives with the SEC and the FINRA. Some agents offer policies only from one insurer while independent agents can offer various products from different firms and provide clients with policies that best fit their particular situations.
Finance Professionals as Financial Planners
These finance professionals can also become financial planners. Their main task is to help clients come up with a plan for achieving their financial goals. They look at a person’s financial situation and guide them in coming up with a comprehensive plan for savings, investments, insurance, retirement and taxes. Some of them also sell financial products.
It’s important to remember that financial planners are not regulated by a particular body. Rather, they are regulated by their profession. For instance, investment advisers who provide financial planning advice need to be regulated by the SEC or the state regulator while accountants who provide financial plans are under the jurisdiction of the state Board of Accountancy.
Tips for Choosing a Finance Professional
After knowing the kind of finance professional you want to go to based on the descriptions provided above, you’re now ready to start your search for this expert. Don’t immediately give your money to the first one you come across. Here are some tips to keep in mind as you go about your search:
1. Don’t be afraid to ask for the finance professional’s credentials.
As mentioned above, different kinds of finance professionals hold different licenses. These licenses will tell you if that person is legally qualified to sell you a particular product or not. These designations are usually written after their names. Go to the FINRA website to check out what particular acronyms mean.
2. Check the background of the finance professional.
You can certainly ask the broker-dealer, investment adviser or other professional if he or she already has been given a disciplinary sanction by a regulator or the kind of complaints he has received. If you feel that you’re not frank enough to get this information outright, you can also do your own background check. State regulators, the SEC and FINRA typically keep a history of the finance professionals that they regulate so they can provide the information you seek. You may also do your own background check to verify any information that they have told you.
3. Read the fine print.
Complete information about a product or service provided to you will be found in the documents that the professional will provide. While they may make for a very boring read, you should still force yourself to go through the fine print so you will understand what you are offered. Get to know the terms, conditions, responsibilities and liabilities of all parties in the transaction.
4. Ask questions.
You are going to be using your money so you should not give it away if you don’t completely understand a particular deal. Ask questions to the finance professional. Don’t feel that you should just trust him or her with everything. Remember that this is your financial future so you should be involved.
5. Ask to be clarified on the fees that you will pay.
Depending on the kind of finance professional you’ll obtain your services from, you need to know exactly what it is your are paying for and how much. This is especially true for firms that offer more than one kind of account. You could be forking out an hourly fee if you want investment or financial advice, a flat fee each year for a financial plan or a commission for each transaction. There are also loads, mark ups and mark downs for various transactions. Be sure you know what you are paying for the services you are getting.
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