Selecting Financial Professionals

is very important in financial planning. If you decide to branch out beyond a retirement plan into the wider world of investing, you may need the help of a stockbroker or investment advisor (sometimes called a "financial planner"). It is important to recognize that most financial professionals are salespeople who make most of their money on commission- which means they get part of what they sell you, just like a real estate agent or car salesperson. Some investment advisers are paid on a salary basis or a percentage of the assets they manage, rather than for selling individual products.

Brokers make recommendations about specific investments like stocks, bonds, or mutual funds. While taking into account a client's overall financial goals, brokers generally do not give a detailed financial plan. Brokers are paid commissions when their clients buy or sell securities through them.

Investments advisers help to develop a financial/investing plan. Some investment advisers also work on a commission basis and sell the products that go into a financial plan. Others are "fee-only planners" who get paid a fee to develop a plan, but do not implement it. As with brokers, investment advisers who get a commission for selling products may have an incentive to steer individuals to certain investments that are more lucrative for them.

Remember: There is no such thing as a free lunch. Financial professionals get paid for the work they do -just like any other professional. Some of their fees are easier to see than others. But, in all cases, investors should always ask the method and amount an adviser is being paid. If the fee is quoted as a percentage, it is critical to understand how that translates into actual dollars. Investors should press financial professionals to explain why a recommended investment strategy or product is right for them. A good rule of thumb for all consumers is to invest only in those products and strategies that they fully undrstand.

Federal or state securities laws require brokers, adviser, and their firms to be licensed, or registered, and to make important information public. But it's up to the individual to find that information and use it to protect his or her investment dollars. The good news is this informatin is easy to get, and one phone call or web search may save people from sending their money to a con artist, a bad broker, or disreputable firm. This is important because investors who do business with an unlicensed securities broker or a firm that later goes out of business are unprotected and there may be no way for them to recover their money.

Investigating Stockbrokers

The Central Registration Depository (or"CRD") is a computerized database that contains informaation about most brokers, their representatives, and the firms for whom they work. For instance, anyone can find out if brokers are properly licensed in his or her state and if they have had run'ins with regulators or have received serious complaints from investors. Informantion is also available regarding brokers' educational backgrounds and their employment history.

Investors can get information from the CRD or from either the office of their State securities regulator or the NASD. State securities regulators may provide more information from the CRD than NASD, especially regarding investor complaints, so it's a good idea to check with them first. Contact information for State securities regulators is on the North American Securities Adiministrators Association (NASAA) Web site

http://www.nasaa.org .

Investigating Investment Advisers

Any individual who gives investment advice for compensation, as well as the firm with whom they are employed, is required to be registered with either the U.S. Securities and Exchange Commission (SEC) or the State Securities Regulator in those states in which they conduct business. Investment adivers who manage $25 million or more in client assets generally must register with the SEC. Those who manage less than $25 million, usually register with the State Securities Regulator.

To find out if advisers are properly registered, read their registration forms. This form, Form ADV has two parts: Part 1 has information about the adviser's business and if they have had problems with regulators or clients: Part 2 outlines the adviser's services, fees and strategies. Always ask for and carefully read both parts of the ADV before hiring an investment adviser. Investment advisers' most recent Form ADV can be found on line at http://www.adviserinfo.sec.gov .

The database currently contains only those Forms ADV filed by investment adviser firms that register electronically using the Investment Adviser Registration Depository, but will eventually expand to encompass all registered investment advisers as well as their firms. Copies of Form ADV for individual advisers and firms are available from State securities regulators or the SEC, depending on the size of the adviser. To contact the State securities regulator go online to http://www.nasaa.org . If the SEC registers the investment adviser, the Form ADV is available for a modest fee plus postage from the SEC.

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