Checking Out New Investment Advisors: A Step-by-Step Guide
Choosing the right investment adviser can have a huge impact on the return you get from your investment portfolio. It’s not just about moving money into the right vehicle at the right time, it’s also about understanding how to hedge against risks, what balance of short and long-term tactics will work best, and which types of investment vehicles will work for each client. That means there’s a lot more to it than just making sure someone’s credentials are up to date, although that is important. Let’s talk about each stage of considering an adviser:
1. Checking Credentials
When you are looking at any adviser or firm, you need to be sure they are in good standing in their industry. It doesn’t matter if you are going for investment advice or water heater repair, certification and oversight show you someone is committed to doing their best within the safety and quality norms of the industry. For financial advisers, there could be a few places to look.
- The SEC’s database of registered independent advisers
- The collected database of advisers registered at the state level
- FINRA’s records and certifications
To make this easier, the Securities and Exchange Commission has a single search database for their own records and FINRA, and it links to the state records.
2. Complaints and Censures
The records discussed above will also contain any official complaints, as well as any disciplinary actions taken professionally because of them. That lets you see whether any of the complaints had enough merit to warrant action.
3. Reviews of the Adviser or Firm
Just checking the regulatory databases for credentials and complaints will not tell you a lot about the performance of an adviser or what the process of working with that person is like. The best way to get that information is by reading reviews to see what others think of investment advisers. This lets you feel out the less quantifiable aspects of the relationship, too. You can see who is known as a great communicator, who will offer you new opportunities and educate you about new approaches or investment vehicles, and who advocates for caution versus high returns. All of these considerations help investors understand which advisers will share their outlook and enthusiasm.
4. Information From the Firm or Adviser
No review process is complete unless you also look at what your financial professionals say about themselves and their approach. Most firms and sole practitioners today have websites with extensive information about their investment philosophies, professional histories, and focus areas. You can learn about whether they specialize in large accounts, corporate investors, or smaller individual investors saving for retirement. This can also help you choose someone with experience working with investors like you.
Conclusions
You’ll need to decide whether you’re looking for an RIA or an investor who works under a broker. Each has its own advantages and disadvantages, and independent advisers can be expensive for small advisers sometimes. In the end, the right choice for you will have to be the one that allows you to rest assured you are getting the right help for your investment goals. That requires a certain level of personal consideration and even chemistry when it comes to communications. That means your final steps will be to reach out and discuss your goals with individual advisers, to find out what they have to say about their ability to help you. This last step before choosing is basically a job interview for your adviser, so make sure you treat it like one. Be skeptical, but also be ready to learn new things about how they invest. Looking for ideas for questions to ask in the reviews you read is a great way to learn more about what intrigued you while researching an adviser.
