More Tough Questions for Your Financial Advisor - Experience & Regulatory Controls
Aside from fee transparency - which is the most vital aspect of selecting a financial advisor - you will want to know what kind of regulatory restrictions they are responsible for adhering to, as well as what kind of education and licensing they possess. As we can attest: licensing gives some investors a certain amount of comfort, however it is NOT necessary that someone have licensing in order to give financial advice. There are many moving parts responsible for the quality of a good financial analyst and advisor. Below are questions that you should ask anyone who is about to manage your money or give you stock advice. Just keep in mind that the answers to these questions should only have an impact on issues of importance to you specifically.
1) Are you a fiduciary?
2) What safeguards does your firm have in place to ensure that my assets are protected from fraud?
3) Have you ever received disciplinary infractions for unlawful or unethical actions?
4) How do you ensure that your firm remains in compliance with legal and regulatory statutes?
No matter what, your advisor should ALWAYS answer "yes" to the fiduciary question. If they do not, politely nod then do not do business with them. If they don't even know what a fiduciary is, then run out the door.
Experience & Education
1) What licenses, certifications and/or credentials do you have?
2) Do you have a financial education? Where did you go to school?
3) How many years have you been a financial advisor? How many years experience do you have in the stock market?
Listen for these terms: CPA (Certified Public Accountant), CFP (Certified Financial Planner), CFS (Certified Fund Specialist), ChFC (Chartered Financial Consultant), CFA (Chartered Financial Analyst) and CLU (Charted Life Underwriter). If they are also a lawyer of have a legal background, they will have a J.D. (Juris Doctor).
Specific sales licenses depend on the firm they work for, but most will hold one of these licences: Series 7, 24, 51, 63, 65, or 66.
Again, none of these are necessary to be good at picking stocks; this is one instance where personal reviews and feedback can be very important.