Friday, October 19, 2007

Research your financial adviser/investor

Our financial adviser handles our Roth IRAs. Beyond that we have our employers 401ks and personal investments that we handle ourselves. I believe a key part to spreading risk is to avoid having one person with total access to your money. Also important is to conduct research on a financial adviser before signing up.

You can do this by visiting NASAA's website, FINRA, and CFP.

Kilpinger offers some of these tips while conducting your research:

  • 60% of those [victims of fraud] had hired a broker based on recommendations from family and friends
  • look for other red flags, such as whether he or she has changed firms every year
  • Check with your state insurance department to make sure the person is licensed and see if the state has taken any disciplinary actions against the salesperson
  • verify that the person really holds the CFP and find out if the CFP Board has taken any disciplinary action against that person
  • learn a bit more about any other designations they're touting. Some require a lot more education and training than others. A few of these designations are primarily marketing tools offered to anyone who pays a big fee and takes an easy test. ("Certified Advisor for Senior Investing", [for example, is a] totally fabricated designation)
  • So it's also important to take precautions to protect yourself -- even if the person checks out. Establish an account at an independent institution (typically a brokerage) to hold your money because some scam artists hide a swindle by issuing false account statements.
  • Never write a check directly to an adviser -- only to the custodial institution, which must send you quarterly statements. And meet with your adviser at least once a year to review your account.

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