Vetting Your Financial Advisor

Why pay for active management when you don’t get it. Most investors want to understand their financial adviser’s role in circumventing losses. Do they understand your pain points? Do they know your risk tolerance? Do they have an exit strategy in place in case the market meltdown occurs again?

You need to vet your financial adviser. Is your adviser licensed to offer all the financial product lines for your money goals and psychological suitability? Many “advisers” are not security and/or fee-based licensed, so that consideration should be part of your hiring criteria.

Does your adviser understand product taxation as it affects your overall tax obligation and tax exposure to Social Security benefits? Do they have the tax management skills to keep more of your money in your pocket and away from Uncle Sam? These are just a few of the talking points you’ll need for the interviewing process. But here are a few ideas that can help in the selection process.

Go to www.brokercheck.finra.org and your state’s Department of Insurance to review the history of your adviser candidate. These sites may reveal bad behavior that may not fit your trust factor and leaves you feeling uncomfortable. Many advisers and insurance agents have LinkedIn accounts and company web sites that have their biographies posted. It’s a bit like reviewing an autobiography, but it may reveal information critical to your selection process. Adviser referrals from friends can be helpful, but recommendations made by people you don’t know will necessarily minimize the value you place on those opinions.

Trusting online postings of glowing recommendations or negative comments can be a crap shoot; but sometimes employees of the adviser post work related comments on their Face Book accounts that can be quite revealing. So tread lightly as you stalk online, and let the vetting process begin.