Financial Consultant FAQs

Here are some of the questions you should always ask when hiring any financial professional:

• What experience do you have, especially with people in my circumstances?

• Where did you go to school? What is your recent employment history?

• What licenses do you hold? Are you registered with the SEC, a state or FINRA?

• What products and services do you offer?

• Can you only recommend a limited number of products or services to me? If so, why?

• How are you paid for your services? What is your usual hourly rate, flat fee or commission?

• Have you ever been disciplined by any government regulator for unethical or improper conduct or been sued by a client who was not happy with the work you did?

• (For Registered Financial Consultants): Will you send me a copy of both parts of your Form ADV?

Be sure to meet potential advisors "face to face" to make sure you get along. And remember: There are many types of individuals who can help you develop a personal financial plan and manage your hard-earned money.

Before you hire any financial professional — whether it's a stockbroker, a financial planner or a financial consultant — you should always find out and make sure you understand how that person gets paid. Financial consultants generally are paid in any of the following ways:

• A percentage of the value of the assets they manage for you;

• An hourly fee for the time they spend working for you;

• A fixed fee;

• A commission on the securities they sell; or

• Some combination of the above.

Each compensation method has potential benefits and possible drawbacks, depending on your individual needs. Ask the financial consultants you interview to explain the differences to you before you do business with them, and get several opinions before making your decision.

Depending on their size, financial consultants have to register with either the SEC or the state securities agency where they have their principal place of business. For the most part, financial consultants who manage $25 million or more in client assets must register with the SEC. If they manage less than $25 million, they must register with the state securities agency in the state where they have their principal place of business.

Most financial consultants must fill out a form called "Form ADV." They must file their ADVs with either the SEC or the state securities agency in the state where they have their principal place of business, depending on the amount of assets they manage.

The ADV consists of two parts. Part I contains information about the advisor's education and business and whether they've had problems with regulators or clients. Part II outlines the adviser's services, fees and strategies. Before you hire someone to be your investment advisor, always ask for, and carefully read, both parts of the ADV. If an advisor won't give you Part I of the ADV, don't do business with them.

You can get copies of Form ADVs from the financial consultant, your state securities regulator or the SEC, depending on the size of the advisor. You can find out how to get in touch with your state securities regulator through the North American Securities Administrators Association, Inc.'s website or by calling 202.737.0900. Ask your state securities regulator whether they've had any complaints about the advisor, and ask them to check the CRD.

If the SEC registers the financial consultant, you can get the Form ADV at a cost from the SEC at:

Office of Public Reference

450 5th Street, NW, Room 1300

Washington, D.C. 20549-0102

phone: 202.942.8090

fax: 202.628.9001

email: publicinfo@sec.gov

If the professional you're considering claims to be a "CERTIFIED FINANCIAL PLANNER™" (CFP®), you should visit the website of the Certified Financial Planner Board of Standards to see if the professional is licensed as a CFP® and whether the professional's license has been suspended or revoked by the Board. You can also call the Board at 888.237.6275 to obtain other disciplinary information about the professional.

While some financial consultants and financial planners have credentials like CFP® (CERTIFIED FINANCIAL PLANNER™) or CFA (Chartered Financial Analyst), they are not required to by federal or state laws. Unlike federally registered advisers, many states do require their advisors and representatives to pass a proficiency exam or meet other requirements.

Financial consultants and financial planners may come from many different educational and professional backgrounds. Before you hire a financial professional, be sure to ask about their background. If they have a credential, ask them what it means and what they had to do to earn it.

Also find out what organization issued the credential, and then contact the organization to verify whether the professional you're considering did, in fact, earn the credential and whether the professional remains in good standing with the organization. You can find out the different types of testing and other requirements on the website of the North American Securities Administrators Association.