How to do a background check on your financial advisor

Do you know where your money is??? If it's in the hands of a financial advisor or if you're considering doing so, there are some important things you need to do first. News 2's Tara Lynn investigates.

By: Tara Lynn | WCBD
Published: March 12, 2009

With the economy the way it is, most of us are worried about our money. And after stories of investment schemes whipping away people's retirement, News 2 wanted to know what you need to do before handing over your money to an investor and what to do if you already have.

Do you know where your money is??? If it's in the hands of a financial advisor or if you're considering doing so, there are some important things you need to do first. I spoke with Joe Baker, president of Alcus Financial Group about how to do a background check on an advisor.

“If you are starting from scratch, the best way to limit your search is to limit it to certified financial planner, CFP, and it's the equivalent of a certified public accountant in the accounting world.”

He says CFPs must be licensed and they have an oversight board that regulates them. The easiest way to check is by looking at their office wall.

“CFPs should have a license hanging up prominently so everybody can see. Also if you're a register rep or typical stock broker, they should have their Series Seven license up there as well,” Baker explained.

Next, you'll want to ask three questions. First, where does the company keep it's accounts?

“The accounts should be held separately from where the advisor's firm is. And the most popular places where accounts are custodies are TD Ameritrade, Schwab, National Financial,” Baker answered.

Second, ask for a list of at least three client references. Lastly, ask for a schedule of fees and the services the adviser will charged you.

You always want to log online to the Securities and Exchange Commission's website or check with the Financial Industry Regulatory Authority to see if the company or the investor has any disciplinary actions or complaints against them.

“The internet is the easiest way to do your search and screen out potentially harmful or bad advisors.”

Baker says doing your homework now, could save you a lot of grief and money woes later on.

To check on commission-based brokers:
Www.finra.org/brokercheck
You can also call 800-289-9999

For fee-based advisers:
Www.adviserinfo.sec.gov

For Certified Financial Planners:
Www.cfp.net/search

Securities and Exchange Commission
http://www.sec.gov/