Below are a few steps that can be a starting point in verifying the legitimacy and credentials of a financial advisor:
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Check their credentials
- Look for certifications like CFP (Certified Financial Planner) or CFA (Chartered Financial Analyst) which indicate that the advisor has met certain educational and experience requirements
- It doesn't make them a good advisor to have these credentials, but it's a good start
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Look them up on the SEC's Investment Adviser Public Disclosure (IAPD) website
- This IAPD site allows you to view an advisor's Form ADV, which provides information on their qualifications, business practices and any disciplinary history
- This IAPD site allows you to view an advisor's Form ADV, which provides information on their qualifications, business practices and any disciplinary history
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Check with the Financial Industry Regulatory Authority (FINRA)
- This organization maintains a database of registered investment advisors and can provide information on an advisor's employment and disciplinary history.
- This organization maintains a database of registered investment advisors and can provide information on an advisor's employment and disciplinary history.
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Get referrals
- Ask friends & family, work colleagues or other professionals (i.e., your accountant, lawyer, etc.) in your network for recommendations
- Ask them questions about why someone may or may not be a good advisor
- This simple step can be very valuable from a diligence perspective, as it's based on a real customer and client experience
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Check for any complaints or legal actions
- Look for any complaints or legal actions against an advisor or his / her firm on the SEC's website (Check Your Investment Professional) or FINRA's BrokerCheck website
- Look for any complaints or legal actions against an advisor or his / her firm on the SEC's website (Check Your Investment Professional) or FINRA's BrokerCheck website
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Verify an insurance agent's license
- These types of advisors sell insurance products, such as life insurance and annuities
- You can ask for their insurance agent license, which is given by the state
- Insurance is regulated at the state level in the U.S.
It is important to remember that even legitimate financial advisors may not be the right fit for a specific financial need - different advisors often have deeper domain expertise in certain areas than others (i.e., tax planning vs. estate planning, certain types of investments & investment strategies and so on). It is important to conduct research and ask questions before working with a financial advisor.
This is a high-level summary. Please refer to FINRA:“Choosing an Investment Professional” for a more comprehensive explanation.