As Wall Street appears to stage a recovery, many investors are nervous about jumping back in on their own after stiff losses in a three-year bear market. But finding a professional adviser — free of conflicts of interest — can seem just as daunting.
State regulators in recent weeks have accused Morgan Stanley of improperly pushing customers to buy its in-house mutual funds, while the National Association of Securities Dealers has proposed rules to force securities firms to reveal how they pay brokers to sell mutual funds.
That has added to concerns that advisers charge too much, know too little and don’t have investors’ best interests at heart. But experts have suggestions on how to find a good adviser.
Know your financial needs. Professional advisers run the gamut, from brokers focused on buying and selling stocks and achieving high returns, to accountants who are more sensitive to minimizing tax costs, to financial planners who analyze an investor’s financial goals and seek to attain them.
Many investors looking for a comprehensive investment strategy opt for financial planners, while those with larger assets who tend to have high taxes seek out more-expensive accountants.
Brokers, meanwhile, can be handy for investors who have some idea of what investments they want and need someone to handle the transaction.
Brokers also can provide advice on “hot” investments, although they often receive larger commissions for higher-risk products.
cCompile a list of potential candidates. Once you know what type of adviser you need, make a list. Experts generally recommend advisers who have some sort of certification.
They also recommend those who don’t accept commissions but instead charge by the hour or receive an annual fee based on the size of an investor’s assets.
Good Web sites for financial planners include those of the National Association of Personal Financial Advisors, www.napfa.org, and the American Institute of Certified Public Accountants, www.cpapfs.org.
Fee-based advisers, meanwhile, can be found at www.feeonly.org and www.garrettplanningnetwork.com. Another source is friends and family.
But experts suggest getting referrals from acquaintances whose financial situation is similar to yours.
cReview the adviser’s credentials and background. Before contacting a prospective planner, check to see whether they have faced disciplinary action.
For this, look at the Securities and Exchange Commission’s Web site at www.sec.gov/investor/brokers.htm or the Certified Financial Planner’s site at www.cfp.net.
Credentials also are important, but experts stress that a good adviser would have a long history of serving clients similar to you.
On the telephone, ask that background information and references be sent to you if necessary.