Down to basics: do you even need one? Before you even begin this process of selecting an investment advisor, ask yourself: do you really need one? There are many reasons why you might, such as feeling more comfortable discussing plans with an actual person, or being disinclined, or too busy, to learn about investments yourself. An investment advisor is a requirement, for these individuals. But for those who take a detailed interest in their investment life and are comfortable making their own decisions, with one of the many excellent online brokers such as TD Ameritrade, E*Trade, and Charles Schwab will both suit your needs and save you money.
Online brokers charge significantly less than 'full-service investment advisors' for basic services like buying shares of stocks, bonds and mutual funds. Likewise, they all have similar money market funds and are similarly insured against loss of your funds due to business failure of the investment firm. They all offer free access to comprehensive investment research data, charting programs and technical services. In short, you'll save money and get good service from any of the great discount brokers. If you routinely research and organize your own investment plans, but then call in your order to a full service broker simply out of habit, then consider making the transition to a discount broker. If you need to see that personal investment advisor that's best for you, read on.
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If you're interested in investing in such funds so you can either research the funds and select one that you feel is good or you can get an advisor that knows his way around the industry to help you choose a fund that is appropriate and that is better for your investment needs.
You can find investment advisors through banking institutions or you can find and find investment advisors who work independently. It is imperative though that you get advise from someone who knows what they're doing, who is experience and who's got a good track record in investments.
Ask for recommendations. Begin your search by asking good friends and relatives who they use and how satisfied they are. At this stage of your search you need to cut your universe of possibilities so you are not overwhelmed with candidates. If you receive three to five investment advisor recommendations from friends, chances are good that one of the following will end up being appropriate for you.
How can you find a good financial professional? Many people rely on references from friends, coworkers, lawyers, or family. Another way is to use Internet search tools that locate professionals based on your needs and desires. Good search tools will screen advisors before recommending them. Among other criteria, they'll check advisors' qualifications and the states of any complaints. They will match you with an advisor who offers the services you need. Once you have a couple of names, whether from recommendations or a search tool, you can start interviewing.
Meet him-her in person... And check out the dress. Meet your candidates in person. You cannot observe body language over the telephone, email reveals mostly typing skills and brochures are simply advertising. You can best judge your comfort factor in person. While you are there, pay attention to your candidates' attire. If he's male, is his tie fastened properly? Did he greet you in his suit jacket? Similar and appropriate observations apply to female candidates. Why does this matter? Firstly, it's a question of respect-- toward you, the client. Secondly, it is a matter of professionalism. A professional investment advisor who wants your business will be concerned with first impressions and will dress the part.
Ask about their investment philosophy. The rationale for making buy and sell decisions is very important. You should pointedly ask your advisor candidate what factors would make her / him recommend buying and, especially, selling. Shares of 'Acme Products' may be an appropriate investment for you, and may indeed result in handsome future profits, but when would you sell, and what would cause a sell recommendation to be made? It should be obvious to everyone that investing without an exit plan can be fatal.
Those selling securities and equities such as stocks, bonds, ETFs, and mutual funds will have to have an SEC license. All such investments have to be registered with the SEC. In most cases a person selling any kind of investment without a permit is a fraudster.
Persons selling insurance polices and annuities will have to be authorized by the state government. Since the SEC considers indexed and variable annuities investments persons selling those investments will now have to be licensed by the SEC.
Check credentials. There are some basic facts you should discover and verify about an investment advisor as: how long has she / he taken an active part in the business, how long with the present firm, how many firms worked for in any special or extraordinary training received, total, special awards issued, and any professional designations. Start by simply asking your candidate for this information; also, request a written resume which will provide you with dates, employers' names and phone numbers you can then use to verify information. It is common for advisors to have collaborated with several firms during a career. A possible negative would be if a candidate had a long tradition of spending only two to three years with each firm.
Conduct a background check. All brokerage firms are legally obliged to conduct extensive background checks on their employees. They do. Moreover, they monitor their investment advisors' activities continually and can observe and screen out those entangled in legal and moral problems. It isn't worth your time and effort to duplicate their investigations.
However, an investment broker can conduct herself in a scrupulously clean manner legally and still be morally off-color or lacking in personal judgment, in your opinion. To check this out start by asking the advisor candidate's manager and co-workers what their personal opinion is of the candidate. Ask off-handedly and not accusingly and compare the responses. Not everyone will give good reviews, but let common sense guide your evaluation. Finally, check with the National Association of Securities Dealers (NASD) to find out if there have been any recent complaints or citations against your candidate.
Make sure the menu is big enough. This one is easy. Ask for a comprehensive list of all the investment vehicles the investment advisor's firm offers. Be sure to ask if there are a lot of no-load or low-load mutual funds available. You're not against your advisor making a living. However, you do not want to pay unjustly high fees either. Most firms offer an abundance of low-cost investment mutual funds. Also check to see if your investment account will automatically 'sweep' up loose cash and deposit it in a standard money market account. If you're a high-end investor with special tax concerns, or an especially sophisticated investor, make sure there are appropriate investment vehicles for your needs-- and that your potential advisor is familiar with administering them.