How to Check a Financial Advisor’s Credentials

A financial advisor acts like a guardian of your hard-earned money who offers suggestions and advice based on his area of financial expertise. Since you are entrusting them with your finances, you must research and verify their credentials, qualifications, and registrations comprehensively. Also, since there are several types of financial advisors with different accreditations, you must find out whether the advisor is qualified to offer you financial advice for your unique needs. For example, an advisor holding a Certified Financial Planner (CFP) certification may not be the best person to advise you on matters concerning tax or estate planning. Additionally, you should take care to work with someone who has no prior criminal record. An advisor having multiple citations on his disciplinary record may be a sign of a red flag as well. It is advised to dig into your advisor’s background to ensure that he has not scammed any of his past clients of money.

However, when selecting a financial advisor, far too many individuals fail to use the same amount of caution. Before entrusting your money to a financial advisor, ensure that you can trust the person, as your current and future financial well-being is dependent on your financial advisor. Verifying the financial advisor’s credentials is important as it reveals the area in which they hold financial expertise and knowledge. If you are seeking guidance on how to manage your finances and build a sufficient corpus to safeguard your future, consult with a professional financial advisor for the same. 

Read further to learn more about financial advisor credentials and which credentials to look out for when making your decision to hire a financial advisor.

Who is a financial advisor?

A financial advisor is someone who advises people on how, where and when to invest. They may offer guidance on how to build a well-balanced financial plan or choose specific investments that contribute towards achieving your financial goals. Financial advisors offer advice on multiple things ranging from selecting a financial instrument to determining how much to invest, how often to evaluate, and taking corrective action if necessary.

Financial advisors are classified by their titles and areas of expertise. Here are a few options to consider, based on your requirements:

  • Retirement planners offer extensive retirement planning services ranging from designing a retirement plan to which retirement account to invest in based on your goals, taxability and risk profile.
  • Wealth planners are responsible for managing the investments of high-net-worth individuals who have at least $1 million in assets. They sort out complex financial difficulties and help clients arrange their investments.
  • Estate planners help in planning the management and transfer of your estate or assets to your beneficiaries.
  • Brokers and investment advisors are authorized to buy and sell stocks, mutual funds, bonds, and other financial instruments on behalf of their clients.
  • Certified exit planners who assist business owners in selling or exiting their companies.
  • A certified financial transitionist assists clients with major life transitions such as the death of a spouse or the sale of a business.
  • A fiduciary is someone who places his client’s interests before their own and is legally bound to act in the best interests of his client at all times. Only Registered Investment Advisors (RIAs) are held to a real fiduciary standard, as defined by the Investment Advisers Act of 1940. These fiduciary standards state that an RIA must always put the client’s best interests ahead of their own, regardless of the circumstances.

How to check a financial advisor’s credentials

Once you have assessed that you require an advisor’s services, you must research and check the credentials of the potential financial advisors. The credentials will give you ample information and clarity if a particular advisor is well suited to serve you. A fiduciary advisor is bound to work in your best interest, while other advisors may work to benefit the companies by selling you specific company-based financial products. So, it becomes paramount that you understand your financial needs and then hire an advisor, provided the credentials are true and can be confirmed.

You can use the below-mentioned tools to help you analyze your financial advisor’s credentials:

1. SEC Investment Advisor Search and State Licensure Records

It is paramount to check the license records for your specific state. For instance, if you’re investing with a Florida-based financial advisor, you can use the Florida license search tool offered by the Florida Department of Financial Services. Other states provide similar services. You can use this to check a financial advisor’s basic background information.

Additionally, if you deal with a financial advisor who manages $25 million or more in assets, they must register with the Securities and Exchange Commission (SEC). The Securities and Exchange Commission (SEC) provides an Investment Adviser Public Disclosure search engine, which can be used to double-check background information.

2. FINRA BrokerCheck

Choosing a financial advisor who is registered with the Financial Industry Regulatory Authority (FINRA) is one of the best available options. These advisors must meet certain qualifications in order to be registered.

FINRA assigns a unique Central Registration Depository (CRD) number to each registered broker. You can use this number to get full background information about the financial advisor using FINRA’s BrokerCheck program, which also includes a history of investor complaints made against the broker or their member firm.

3. Find out and identify different professional credentials

The Financial Industry Regulatory Authority (FINRA) provides a page that you can use to identify and understand the numerous professional certifications that an advisor can hold. Each designation is included on the page, along with a link to the body that grants the distinction.

For instance, if you are looking to hire a CFP, the individual must have earned the CFP® designation (certified financial planner). The Certified Financial Planner Board of Standards, the certifying agency for all CFPs, can help you confirm these credentials. Be careful when dealing with such certification as these are easy to phish/replicate, and several complaints have been lodged of individuals impersonating as credible and certified advisors. 

4. Carry out an extensive search using online search tools

Informal search tools can be truly beneficial when establishing the credentials of your financial advisor. You have the right to inquire about a financial advisor’s background, their schooling and college, and how long they’ve worked in the field.

Cross-referencing what you find and utilizing resources like state research tools, social media, and online research can help you effectively validate fundamental information. It is essential to seek a different financial advisor if you uncover any form of fraud or discover anything else that makes you uncomfortable.

5. Ascertain whether the advisor is certified by either of SEC or FINRA

At least one of two regulating organizations (SEC and FINRA) oversees every financial planner or advisor. You’ll need to figure out which one it is to verify their legitimacy. Many individuals may pursue you through an agency as a certified SEC or FINRA advisor. You have to be vigilant and verify if the agency and the financial advisors credentials check out or not.

6. Additional online resources

You can also use one of the many financial planner-specific web search engines, which will only show advisors who have passed a minimal background check. This indicates that their credentials have been validated previously. Most online search engines allow you to refine your results by geographic region, areas of specialization, or compensation type. These background checks should be taken seriously and ample time should be devoted for the same.

7. Set up a meeting with your prospective financial advisor

It’s good to schedule face-to-face appointments with the advisors on your prospects list once you’ve completed your online checks. Remember, since the advisor would potentially be managing your finances, retirement planning, etc. and you’ll be possibly working together for a lengthy period of time, you must understand how they work and ensure that both of you are on the same page.

You can have a questionnaire prepared that will assist you in interviewing candidates for financial planning. Enquire their credentials in detail, ranging from education and professional qualifications to their experience and services.

To summarize

Not all financial advisors are trained to the same standard or will provide you with the same quality of service. So, before you choose an advisor, make sure you do your homework and hire an advisor who can satisfy your financial planning needs. Examine your financial advisor’s credentials and make sure they are viable. Check their regulatory background with your state regulatory agency, FINRA’s BrokerCheck, and the Securities and Exchange Commission’s Investment Advisor Public Disclosure database. Finally, remember that creating a successful, long-term financial roadmap is directly dependent on who you hire to manage your money.

Use the free advisor match tool to match with an experienced and certified financial advisor who will be able to guide you effectively on how to effectively manage your finances to attain your future financial goals. Give us basic details about yourself, and Paladin Registry will match you with 1-3 professional financial fiduciaries that may be suited to help you.

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