Can You Trust Your Financial Advisor?
You’ve done your homework and you shopped around, you even asked your brother in law, your neighbor and your boss who helps them with their financial planning but your still not sure. How do you know you can really trust your advisor? After all your families’ financial future is riding on it!
This is becoming a harder and harder question to answer, why? There are now at least 89 different designations doled out by about 87 different financial services associations and professional institutions. Your advisor might be a CAC, CEP, CFA, CFP, CLU, CHFC, RFA, RIA, CSA, AEP, FIC, LUTCF, and there is even the ones I have RFC & FMM.(to learn more about the RFC & FMM designations visit www.IARFC.com and www.foundmoneymangement.org) But with all of this alphabet soup how do you know what it all means, and can it really help you in determining if your advisor is qualified to help you?
Obviously we don’t have room in this article to go into all 89 designations and break them down for you, and you probably have more important things to do with the rest of your day than to read about the various financial planning designations. However the professional institutions that create and monitor these designations do provide a valuable service. Currently there are no consistent licensing requirements for the various persons who call themselves “financial Planners” so the public has a critical need for a method of distinguishing the qualified and dedicated financial advisor from the know it all down the block who woke up one day and decided to hang out a shingle.
Organizations like the IARFC(International Association of Registered Financial Consultants) and others require their members not only to adhere to a strict code of ethics but also they must meet other requirements to become and stay an active member. For example the IARFC requires all of its members to meet and document 7 separate stringent requirements in the areas of education, experience, examinations, integrity, licensing, ethics and significant continuing professional education. But even if your advisor has earned one of these coveted designations does that really make him/her trustworthy? After all he may have met all of the requirements and still be dishonest. In fact there are still many loopholes in today’s regulatory systems and even seemingly ethical advisors with credentials may have a past record of doing the wrong thing and it may be harder than you think to find out about it.
Some of the problems with the current system include, regulatory agencies allowing both investment and insurance advisors to do business even after they’ve been convicted of a serious violation against public interest, Investment “professionals” can be convicted of perpetrating and investment scam in one state, then move to another state to commit the same crime, or how about the problem of an advisor being bared from the securities business only to later open an insurance business? How about the fact that sometimes one regulatory agency such as the SEC may not have the same information about an individual that another regulatory agency like the NASD might have?
Once again we are left in a quandary, with so many regulatory loopholes how do we know who we can trust? Wouldn’t it be great if you could just do an affordable background check on any advisor you are even thinking of doing business with and it would cover all of the areas mentioned above and more? Well now you can! Recently an organization known as the National Ethics Bureau has made this service available to the general public on their website www.EthicsCheck.com. Their Ethics Check System can check out your advisor on just about every level. They will do a criminal background check, a civil background check, a professional license check, a department of insurance check, a check of both the SEC and the NASD, as well as a Federal, State and Private agency check.
Now you don’t have to guess, or go with your gut, you can find out for sure if you are dealing with a straight shooter or someone who has had problems before. Their service is very affordable and can even be free. For example some “Financial Planners” have joined the National Ethics Bureau voluntarily and willingly submitted to their vigorous background check.
Why? They felt they had nothing to hide and by becoming a member they could offer some additional value to their clients. After all wouldn’t you sleep better if you knew for sure that your financial advisor could be trusted and he/she had a flawless record of ethical business behavior? And the best part is that you can find these advisors for free. You don’t have to pay for a background check you can just search and see if your advisor is already a member or you can look for a new advisor with a pre-checked flawless record. What a great service.
Last but not least even if your advisor has the right designation and doesn’t have a criminal background with hundreds of people suing him your final line of defense is your own good judgment. Make sure when you meet with the advisor for the first time that they are asking you a lot of questions to try to see how to really help you. Make sure that you never feel pressured to move forward. If your first visit feels like a sales call it probably is, and he/she may be more concerned with their own agenda then really helping you. If you get that kind of a bad vibe than run the other way and keep searching. Unfortunately for every great advisor there are probably 8 or 9 not so great advisors, so get to know them well before you decide and make sure you can really trust their advice. Best wishes and good hunting! |