Homework/Additional Reading

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Financial Chaos Topic: Choosing a Financial Professional
The US Securities Exchange Commission (SEC) says the best advice it can give you about how to invest wisely is “Ask Questions.” The following is a list of questions which are helpful in choosing a financial professional:
 

SEC Questions:
 

* How long has your firm been in business?

* What training and experience do you have? How long have you been in the business?

* What is your investment philosophy?

* Describe your typical client. Can you provide me with some names and telephone numbers of your long term clients?

* How do you get paid? By commission? Amount of assets you manage? Another method?

* Do you make more if I buy this stock (or bond, or mutual fund) rather than another?

* Are you participating in a sales contest? Is this purchase really in my best interest, or are you trying to win a prize?

* If your financial professional changes firms, ask: Did they pay you to change firms? Do you get anything for bringing me along?

 AARP Questions

  * Will you provide a written statement of the total dollars in fees and commissions earned by you and your firm and any affiliated broker-dealer, insurance agency or other similar organization because of our relationship?* Do you accept fiduciary responsibility across all aspects of our relationship?
          Note: “Fiduciary” means that the person working for you owes you the highest possible duty of care and loyalty, so that a relationship of trust and confidence exists between you and the planner. While you may think that this sort of trust and confidence will naturally exist, a fiduciary relationship usually depends on the facts and circumstances of a particular situation. Many brokers will not accept fiduciary responsibility because they may already have a fiduciary relationship with their brokerage firm that can conflict with their duty to you.
 * To the extent that you will be giving me on-going investment advice, will you be providing me with a quarterly written report of my portfolio’s rate of return, along with benchmarks very similar to my portfolio, so that I can assess progress?
  * Please provide two references from clients who have worked with you over the last five years.
 
NAPFA Questions
 * What are your financial planning credentials/designations and affiliations?
 * How long have you been offering financial planning services?
 * Do you have clients who might be willing to speak with me about your services?
 * Have you ever been cited by a professional or regulatory governing body for disciplinary reasons?
  * Will you sign the Fiduciary Oath?
 * Do you have a minimum fee?
  * Do you receive referral fees?
 * Do you receive on-going income from any of the mutual finds that you recommended in the form of «12(b)1» fees, «trailing» commissions, or other continuing payouts?
  * Are there financial incentives for you to recommend certain financial products?
  And to make sure your financial professional isn't a crook, check them out at the following sites: Board of Standards

SEC-Protect Your Money   

 

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