How can I determine if my financial planner has a criminal history?

Most states have a free, online criminal history or offender database. Check first with the main website for your state, and run a check to determine if your planner has a hidden criminal past.

What if I find a financial planner who says his clients make huge returns on their investments?

Any planner who boasts about the high rates of return for his clients is probably not telling the truth, and most likely is not suitable for you.

Should I ask my friends for referrals when identifying a potential planner?

Most likely not, since this is the principal way in which fraudulent planners ensnare new, unsuspecting victims. Many people think that by asking friends for advice, they will somehow escape the hard research they must do to identify the best financial planner for them. You should do the research yourself and be diligent in your interviews.

What types of questions might I ask a potential financial planner?

You might ask such questions as:

• Where did you go to school?

• What licenses do you hold?

• Are you registered with the SEC, a state or financial industry regulatory authority?

• Can you recommend only a limited number of products or services, and why?

• If you are a registered investment adviser, can you give me a copy of your Form ADV?

Why is a Form ADV important?

The SEC Form ADV is required by all licensed investment advisers who manage more than $25 million. Anyone who manages less than that must register with his state securities regulator. Part one of the form lists the adviser's education, business, and disciplinary history for the past ten years. Part two lists information pertaining to the adviser's fees and investment strategies.

My financial adviser mentioned that he is a fiduciary. What does this mean?

It means that in all circumstances your adviser will put your interests first—above his own, his firm's, or the investment companies he represents. You should ask if your adviser is a fiduciary.

 
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