Financial Advice: Five Questions to Ask, Including the F-Word

It seems like everybody is in the financial advice-business, but how do you know if someone is qualified to help you? You don't need to grill the financial professional to determine a few key factors that might help you decide whether or not to engage him or her. The responses will help define what kind of relationship you can expect in the future.

If you are interviewing new financial pros or working with your existing advisor, print out these five questions -- and don't be shy! You are entitled to have this information!

1) What is your training in this subject matter? I know plenty of stock brokers who are great at what they do, but have never had formal training. Similarly, there are credentialed folks who stink. That said, I would prefer to know up front whether someone has worked hard and diligently to attain a degree or designation and continues to fulfill ongoing continuing education requirements.

Designations include: CFP (Certified Financial Planner) CFA (Chartered Financial Analyst) or CPA (Certified Public Accountant). The CFP is the one that indicates a holistic approach to planning and personal financial management, but the other two are equally rigorous.

2) How are you licensed? This is a big one because it can determine if the advice-giver is registered with the SEC as a "fiduciary." I like to call this the "F-word" because it's so loaded. In a fiduciary relationship, your interests must come before the advisor's and/or the firm for whom he works. It's all about you and what's best for your financial life.

Did you know that most professionals in the financial-advice business aren't required to put you first? They don't have a fiduciary responsibility. In fact, the standard under which most brokerage and insurance firm employees operate is the broader and less rigorous concept of "suitability," which may or may not be in your best interest.

That means that your broker does not need to tell you if a cheaper investment alternative exists to the mutual find he is selling or whether the 529 plan in your own state is a better alternative to the one which pays him a commission. This has created tension and a legal battle between the Financial Planning Association and the SEC.

Continue reading and see my appearance on "The CBS Early Show" with Harry Smith, at moneywach.com

Follow Jill Schlesinger on Twitter: www.twitter.com/jillonmoney

Comments

[Lita Smith-Mines - Huffpost Blogger]

This is a valuable, informative piece. My clients' eyes frequently glaze over when I advocate fiduciaries, but I do so nevertheless.

I will be linking to this on my blog, "Tales From The Real Estate Wars" http://real-lawyer.livejournal.com/

[Jill Schlesinger - Huffpost Blogger]

We just need a better word than "FIDUCIARY," which sounds scary and awful!

[plebeianswillrevolt]

you seem to have forgotten the MOST important question, the one that you can never get a straight answer to: What do you charge, how much does it cost???

The answer: Well, it depends...­. blah, blah, blah...... screwed...­..........­..........­.

[Jill Schlesinger - Huffpost Blogger]

That question is included in the blog (in the continuation) and I spent a lot of time reviewing it with Harry Smith on "The Early Show". btw, I received a TON of e-mails from professionals who are Registered Investment Advisors (fiduciaries) after the TES aired. They were psyched that we were talking about this issue on national TV!