Credit Herald

When it comes to selecting an investment professional, trust is a relative term.

Many investors understandably feel a need for additional help in navigating today’s volatile markets and economy. That means carefully checking out individual securities brokers or financial planners to find those who merit their confidence.

But no matter how impressive the credentials of any professional, recent history provides a harsh, high-visibility warning against trusting blindly:

• Texas financier R. Allen Stanford promised investors higher interest rates on certificates of deposit than those of major banks.

• New York investment advisor Bernard Madoff reported remarkably stable gains of about 10 percent to his investors for many years.

Investors trusted both. Stanford and Madoff now, of course, face criminal charges for allegedly running Ponzi schemes, in which new money is paid to current investors to give the impression of gains while the operator pockets most of the funds.

This doesn’t mean you should approach every investment adviser as a crook. Select one judiciously, but from then on continue to monitor your money, ask questions, be involved in decisions and scrutinize financial statements.

“One of the biggest mistakes any investor can make is to pick someone to handle their money and completely turn everything over to that person,” said Andy Millard, a certified financial planner and president of Main Street Financial Group, of Tryon, N.C. “I appreciate the trust my clients give me, but I don’t want to hear, ‘Oh, Andy, just go ahead because I trust you.’”

The professional should be your partner, and if you’re a partner as well, “you won’t end up a client of someone like Bernie Madoff,” Millard said.

The selection process requires examining your own objectives and the financial services you need. A retiree in fixed-income investments won’t have the same needs as a risk-taker who wants to trade options. Also compare your philosophy with that of the professional.

“Investors are nervous because of the severe declines in their portfolios, so the decision on whether to hire someone comes down to the investor’s confidence about handling their own investments,” said John Gannon, senior vice president in the Office of Investment Education of the Financial Industry Regulatory Authority in Washington online cash advance. “If you do hire someone, different financial professionals offer different services, so find one with expertise in investments that fit your goals.”

In checking out a broker’s record, go online to www.finra.org/brokercheck, which has a database of more than 6,000 registered brokers, Gannon said. The database can also be accessed by calling 800-289-9999. It tells you whether the person in question is licensed, the licenses held, work history and length of time in the industry.

“The database will also tell you if someone has worked for five firms in five years — a red flag that the person could be having a hard time,” said Gannon, who noted that lack of a license was definitely a red flag. “You can get disciplinary information about the individual as well.”

Find out how much the broker will charge in commission and fees, the minimum required deposit, how available the broker will be and what perks the firm may offer.

Financial planners, who formulate a detailed game plan for your financial future, should also be dealt with in an open manner that starts with the free get-to-know-each-other consultation.

“A common mistake people make is not telling the planner what’s on their minds because they feel funny talking about money,” said Deb Maloy, a certified financial planner in Wakefield, Mass., and president of the Massachusetts Chapter of the Financial Planning Association. “Ask a planner necessary questions in the complimentary consultation because the fit must be good for both client and planner.”

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