Finding a Financial Professional

At some point you may turn to a professional for help, particularly if you’re trying to achieve different goals – such as retirement, children’s education, and buying a home.

There is no guarantee you will find a financial professional who will put your interests first and provides effective, personalized service that takes into account the specific needs of you and your family. But there are ways to increase the odds of finding a trust financial professional.

Before you begin the search for someone you can trust, you need to identify the type of help you need and understand the distinction between two basic types of financial professionals – investment advisers and brokers.

Investment advisers help you make investment decisions and manage your portfolio, and have a fiduciary duty, or legal requirement, to act in your best interest, not for their own personal gain. Investment advisers (IAs) may work as sole practitioners or, more commonly, at advisory firms that employ a number of advisers.

Unlike brokers, who earn a commission on trades they make on your behalf, investment advisers charge a fee for their services, sometimes based on a percentage of the money they manage, sometimes on an hourly basis, and sometimes on a retainer basis for a package of services.

In selecting an adviser, be sure to do your homework. Advisers must provide you with key information, such as their credentials, years and type of professional experience, the services they provide, how they are compensated, and any conflicts of interest that may apply. Advisers are required to disclose this information on a two-part document called Form ADV, with Part 2 serving as the primary disclosure document.

You can read both parts of the ADV through the SEC's Investment Adviser Public Disclosure website.

You should also ask about a prospective adviser’s work with other clients whose financial situation may be similar to your own.

Brokers and broker-dealers are people and firms who are in the business of buying and selling securities on behalf of customers.

Individual salespeople employed by brokerage firms are called stockbrokers and are officially referred to as registered representatives. But these individuals use other unofficial titles, too, including financial consultant, financial adviser, and investment consultant. In recent years, brokerage firms have offered a broader range of investment planning services in addition to trading securities.

Many brokers’ compensation is based on the commissions clients pay each time they buy or sell a security.

Unlike investment advisers, brokers are under no legal obligation to act as fiduciaries. They are required to recommend only assets that are suitable for you, based on your financial situation, needs, and other securities you hold. Brokers also have no legal responsibility to inform you of conflicts of interest. Other parties – specifically, the companies offering the securities or the firms that brokers work for – may compensate brokers for selling you certain investments.

Brokers may be required to be registered with more than one regulatory authority, depending on where they live, to whom they offer securities, and the type of business they operate. Brokers engaged in the offer and sale of securities in Texas, for example, are required to be registered with the Texas State Securities Board.

To research a broker, start with the Financial Industry Regulatory Authority’s BrokerCheck, a database that holds licensing and registration information for registered representatives and securities dealers and brokerage firms.

BrokerCheck does not always provide a complete record, but in most cases it will include employment history; disciplinary actions that have been taken by federal, state, and self-regulatory organizations; whether the broker or agent holds other professional designations; civil judgments and arbitrations in securities disputes; bankruptcy filings; and outstanding liens.

The Investor's Checklist

  • Receive complete information about the risks, obligations, and costs of any investment before you invest.
  • Don’t be rushed into an investment. Make a quick decision today and you may regret it for a lifetime.
  • Contact the Texas State Securities Board to obtain all regulatory information about firms and individuals handling your accounts.
  • Receive copies of all completed account forms and agreements.
  • Make sure you understand your account statements and check for accuracy.
  • Make sure you can access your funds in a timely manner and receive information about any restrictions or limitations on access.
  • Know precisely how much an investment is costing you in fees, commissions or other charges.