He had to resign due to an SEC investigation, but we bought 3 annuities from him

How to find a good financial adviser


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Question: My wife and I purchased three annuities through a financial advisor with a large financial institution over the past 10 years. The advisor we worked with had to resign due to an SEC investigation. We became a “house account” at this financial institution. How should we go about finding a new financial advisor who can help us with our accounts and other investment/retirement issues? And what should we look out for to make sure this doesn’t happen again? (You can use this tool to get matched with an adviser who might meet your needs.)

Answer: Unfortunately, it’s more common than you might think that an adviser engages in misconduct. A study from Stanford’s Institute of Economic Policy Research in 2018 found that “more than 7% of financial advisers were tied to some sort of misconduct between 2005 and 2015.” And while there’s no foolproof way to ensure you won’t get a problematic adviser, there are ways to get a good adviser and to vet them more thoroughly. First up, let’s look at how to find an adviser that might meet your needs, and then we will talk about how to vet them. 

“One way to look for a financial adviser is through a financial adviser marketplace,” says Alana Benson, investing spokesperson at NerdWallet.(You can use this tool to get matched with an adviser who might meet your needs.) “These services vet financial advisers and investigate their credentials so you don’t have to,” says Benson. Though, of course, “financial advisers are human beings and humans are fallible, so there’s no guarantee that an adviser will act in your best interest,” she adds. Another place to look is the National Association of Personal Financial Advisors (NAPFA)’s “Find An Advisor” tool where you can search for a professional based on location, markets served, fee structure and areas of expertise, says Hubbard.

Pros say you likely want to work with an adviser who is a fee-only fiduciary, as they will at least have a legal obligation to make investment decisions with your best interests in mind. (It sounds like your last adviser was not a fiduciary.)  “A fiduciary adviser is required to act in your best interest, and fee-only means that they are not able to earn commissions or any other compensation aside from the fees you pay directly,” says certified financial planner Zack Hubbard of Greenspring Advisors. Working with a certified financial planner (CFP) is one way to guarantee that you’ll be working with someone who has a fiduciary duty to you. CFPs are required to complete either 6,000 hours of professional experience related to the financial planning process or 4,000 hours of apprenticeship experience in addition to completing coursework through a CFP Board Registered Program,  holding a bachelor’s degree or higher, passing the CFP exam, signing the Ethics Declaration and passing a background check.

However, “this is complicated if the CFP professional is working in a broker-dealer environment which can allow an adviser to wear a different hat and not be a fiduciary for certain types of transactions,” says certified financial planner and chartered retirement planning counselor Steve Stanganelli. Well-known examples of broker-dealers include companies like Charles Schwab and TD Ameritrade, and broker-dealers are typically paid brokerage fees when executing trades. For this reason, Stanganelli says it may help to find a firm that is not affiliated with a broker-dealer and is instead a standalone investment adviser firm. “Federal law requires that these firms and their representatives act as fiduciaries,” says Stanganelli. A good place to start? “Talk to your family and friends and ask who they use and what their experience has been like with their adviser,” says certified financial planner Grace Yung.

If you like the bank you are with, another thing you can do to ease your mind is ask to meet with the branch manager of the office where your previous adviser was located and explain your concerns. “Ask them to introduce you to advisers in the office with experience and who do not have any customer complaints, and see who you connect with,” says certified financial planner Matthew Ramos. 

You can use this tool to get matched with an adviser who might meet your needs.

How to vet an adviser you like

Experts advise that investors use the tools available on the FINRA and SEC websites to check on brokers and investment advisers. “If there have been any federal or state sanctions, they’ll be listed there as well as in each firm’s Form ADV (1, 2A, and 2B). You can also use these tools to check the work and registration history of the adviser. If you see a lot of changes with short employment stints, it may be because the adviser has a disciplinary history that needs to be questioned further,” says Stanganelli. Yung recommends you research the person on Brokercheck.com to see if your prospective advisers have any disciplinary actions or negative marks against them. There’s one big question you need to ask yourself before you hire a financial adviser and experts say you should also consider these 5 things. 

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