Hiring an Investment Professional

Investments are sold by a lot of different people and organizations. Recent deregulation had blurred the old lines in the finance industry. Professionals offer a variety of services at a variety of prices. It pays check out who you are dealing with before buying.

You can get investment advice from most financial institutions that sell investments, including brokerages, banks, mutual funds, and insurance companies. You can also hire an investment adviser, an accountant, a financial planner, or other professional to help you make investment decisions.

Investment Advisers and Financial Planners

Some financial planners and investment advisers offer a complete financial plan, assessing every aspect of your financial life and developing a detailed strategy for meeting your financial goals. They may charge you a flat fee, a percentage of your assets that they manage, or receive commissions from the companies whose products you buy, or a combination of these. You should know exactly what services you are getting, how much they will cost, and how your investment professional gets paid. Smaller investment advisers are sometimes regulated by the states in which they operate.

Brokers

Brokers make recommendations about specific investments like stocks, bonds, or mutual funds. While taking into account your overall financial goals, most brokers will not give you a detailed financial plan. Brokers are generally paid commissions when you buy or sell securities through them.

Brokerages vary widely in the quantity and quality of the services they provide for customers. Some have large research staffs, others specialize in particular types of companies, for example, companies that are new and have never been in business before.

• A discount brokerage charges lower fees and commissions for its services than what you'd pay at a full-service brokerage. But generally you have to research and choose investments by yourself.
• A full-service brokerage costs more, but the higher fees and commissions pay for a broker's investment advice based on that firm's research.

You can check out your prospective or current broker online through the National Association of Securities Dealers. Another good place to turn for information is your state securities agency. The North American Securities Administrators Association has contact information for state agencies.

Questions to Ask a Broker or Investment Advisor

The U.S. Securities and Exchange Commission suggests that investors shop around before hiring an investment professional. They list there questions to ask.

• Are you licensed with the states or SEC?
• Do you have disciplinary problems on file with the NASD or states?
• How are you compensated?
• What is your relevant experience as a financial professional?
• What kind of special education or training have you received?
• How would you describe your investment philosophy?
• Do you understand my financial goals and risk tolerance?
• What other clients do you have whom I could speak to?
• What kind of periodic reports on my money should I expect from you?