How much do you know about the people offering advice about your money — or even hands-on 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.
Here’s how to find out all you can before handing over your hard-earned dollars.
Research a broker
People or firms who handle investment transactions (buying or selling securities such as stocks, bonds, mutual funds and other investment products) are considered “broker-dealers.” They are required to register with the Securities and Exchange Commission as a registered representative and also be members of the Financial Industry Regulatory Authority.
Using FINRA’s BrokerCheck tool
, individuals can research whether a person or firm is registered to offer investment advice and/or sell stocks, bonds, mutual funds and other investments. This database shared between the SEC and FINRA generates a free report detailing licensing information, employment history and any actions that have been taken against a broker. Disciplinary actions issued in 2005 or later are also available at FINRA Disciplinary Actions Online database
State regulatory agencies maintain databases of enforcement orders and judgments.
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.
Check out an 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 are part of the FINRA’s BrokerCheck database. Investment advisors who manage less than that must, at a minimum, register with the state security regulator. (Use NASAAs state regulator directory, linked to above, to get details.)
Even more information can be gleaned from an advisor’s IAPD report, which you can access on the Investment Adviser Public Disclosure website
. What you’ll find out: Their employment history, licensing information, professional designations, registration history and disciplinary actions (all the stuff you won’t find on an advisor’s Facebook page, like criminal convictions, civil judgments and arbitration awards).
offers a similar searchable database of more than 700,000 advisors that pulls information from the SEC and/or FINRA databases and other sources. Although the information is the same as what you’ll get from the regulatory websites, it’s presented in an easily digestible format. Firms are also allowed to add more information to their profile, but they cannot edit information about work history, regulatory disclosures or exam information.
Find out if your financial planner’s credentials are legit
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. However, unlike brokers or investment advisors, 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 in the field. Still, there are stones that can be overturned to find information.
Only those who pass a comprehensive exam and complete ongoing education are allowed to use the CFP designation.
Start with that string of letters trailing a financial planner’s name on his or her business card. The premier designation for financial planners 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 they now or at one time held the CFP designation — and see if there are any disciplinary actions on record.
As 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.) Information on each acronym includes any education requirements to qualify 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.
Gain insight into insurance agents
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.
Insurance agents who sell products that are considered investments, like variable annuities or variable life insurance policies that have an investment component, must be licensed as registered representatives and will be searchable with the FINRA BrokerCheck database linked above.
Learn about accountants and tax preparers
Like financial planners, accountants have a premier professional accreditation: the certified professional accountant, or CPA designation. The American Institute of Certified Professional Accountants runs a verification database
; just be aware that the list may be incomplete because not every state licensing agency contributes to it. Go to your state’s Board of Accountancy (the AICPA maintains a directory of state-run websites
) to see if there are records. The IRS also keeps a searchable directory
of federal tax return preparers with credentials and select qualifications.
This article was written by NerdWallet and was originally published by Forbes.