How to Check Out Your Financial Planner, Advisor or Broker

It's important to check into the person handling your money. Here’s how to dig deep.
Dayana Yochim
By Dayana Yochim 
Edited by Robert Beaupre
How to Do a Background Check on Your Financial Pro

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How much do you know about the people offering advice about your money — or managing it? Consumers have access to a lot more information about a financial pro than what’s presented in a brochure or mentioned during a meet-and-greet.

For example, investment advisors and their firms must have a disclosure called Form ADV on file and easily accessible. This is the most important document to check your financial advisor's record, with information on everything from licensing and billing practices to disciplinary actions taken against the firm and any individuals.

Beyond Form ADV, other sources are helpful for a thorough background check, depending on the type of financial professional you want to use.

Financial planner

If a financial planner offers a combination of services, such as managing investments or selling insurance, there will be searchable records with the entities that regulate those industries. (See the sections on investment advisors and insurance agents for directions.)

However, there is no regulatory commission keeping tabs on people who call themselves “financial planners.” In fact, anyone can use that title, even without having formal training. Still, there are stones that can be overturned to find information.

Start with the letters trailing a financial planner’s name on his or her business card. The premier designation is CFP (certified financial planner) and only those who pass a comprehensive exam and complete ongoing education are allowed to use it.

  • Head to the CFP Board’s home page to verify an individual’s certification status — whether the person now or at one time held the CFP designation — and check for any disciplinary actions on record.

  • For the rest of the alphabet soup of designations, FINRA’s professional designations database will tell you, for example, if GFS is a thing. (It is. It stands for global financial steward.) You'll find any education requirements to use the designation, who (if anyone) accredits the designation, whether there’s a published list of disciplinary actions, and if there’s a way to check an individual’s or firm’s professional status and file a complaint.

Investment advisor

Investment advisors can go by many names, including asset managers, portfolio managers, wealth managers and investment counselors. What they have in common is that they provide specific investment advice to clients. (Before you hire one, here are 10 questions to ask.)

  • Advisors who manage $110 million or more in client assets are regulated by the SEC and part of the SEC broker check database. Investment advisors who manage less than that must, at a minimum, register with the state security regulator. (Use the NASAA state regulator directory to get details.)

  • The Investment Adviser Public Disclosure report has: employment history, licensing information, professional designations and registration history. The IAPD also lists disciplinary actions — all the stuff you won’t find on an advisor’s Facebook page, like criminal convictions, civil judgments and arbitration awards.

  • BrightScope offers a searchable database of more than 700,000 advisors, pulling information from the SEC and/or FINRA databases and other sources. The information is the same as you’ll get from the regulatory websites but presented in an easily digestible format. Firms are allowed to add more information to their profile, but they cannot edit work history, regulatory disclosures or exam information.

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People or firms who handle investment transactions — buying or selling stocks, bonds, mutual funds and other investment products — are considered “broker-dealers.” Brokers must register with the Securities and Exchange Commission as a registered representative and also be members of the Financial Industry Regulatory Authority.

  • Check out a broker-dealer using FINRA’s BrokerCheck tool. This database, shared between the SEC and FINRA, generates a free report. It shows whether a person or firm is registered to offer investment advice and/or sell investments, and gives licensing information, employment history and any actions taken against a broker.

  • Check the FINRA Disciplinary Actions Online database for disciplinary actions issued in 2005 or later.

  • State regulatory agencies also maintain databases of enforcement orders and judgments. The North American Securities Administrators Association provides an alphabetized directory to each jurisdiction’s website.

Insurance agent

The National Association of Insurance Commissioners keeps a database of financial and complaint information on insurance companies. But it’s up to each state’s insurance commission to be the watchdog over the individuals who sell insurance products — things like life, property and health insurance.

  • Use the NAIC’s map of states and jurisdictions to start your background check on your insurance agent.

  • Use the FINRA BrokerCheck database to search for insurance agents who must be licensed as registered representatives — those who sell products that are considered investments, like variable annuities or variable life insurance policies with an investment component.

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Accountant and tax preparer

Like financial planners, accountants have a premier professional accreditation: the certified professional accountant, or CPA, designation.

  • The National Association of State Boards of Accountancy runs a verification database; just be aware that the list may be incomplete because not every state licensing agency contributes to it.

  • The IRS keeps a searchable directory of federal tax return preparers with credentials and select qualifications.

» Looking for guidance? View our list of the best financial advisors.

This article was written by NerdWallet and was originally published by Forbes.

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