investing

3 ways to spy on your financial planner

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Highlights
  • Find out if your financial planner is a Certified Financial Planner.
  • Where can I find out more about my registered investment adviser?
  • Where do I go for information if my planner is also a broker dealer?

Consumers are accustomed to having their personal information collected but turnabout is fair play. You are entitled to more than mere verbal assurances from the financial planner in your life. After all, this is the professional who's going to guide you as you save for college, retirement and other important milestones.

Want to learn more about your Certified Financial Planner, or CFP? Looking to choose a planner but want more up-to-date information on your candidate? Check these three places to get the skinny on your money pro:

Where to learn if a planner is a Certified Financial Planner

To find out if a planner is a CFP, go to the Certified Financial Planner Board of Standards and search by name. You can find out if your financial planner is certified, actively practicing or the target of disciplinary actions by the CFP Standards Board.

To be certified, a financial planner must have a bachelor's degree plus 15 college credit hours related to financial planning and must complete an additional 30 hours of industry seminars in financial planning every two years, including at least two hours on the CFP board's ethical standards, says Tim Stifel, director of stakeholder communications for the Certified Financial Planner Board of Standards in Washington D.C. Individuals also must have three years of experience and pass a certification exam that has a 55 percent pass rate, he says.

CFP board ethics require Certified Financial Planners to disclose any conflicts of interest to clients and make recommendations that are in their clients' best interests, says Stifel.

Is your financial planner also a registered investment adviser?

If your financial planner is also a registered investment adviser, you'll be able to learn a lot more about him.

Registered investment advisers have to register with the Securities and Exchange Commission or the state. The yearly forms they file are publicly available and are a jackpot of information for clients and potential clients.

Called Form ADV, the annual filing comes in two parts. Part I will tell you things such as who owns the firm, the amount of assets it manages, the type of clients it serves (individuals, high net-worth clients, pensions, etc.), how many people it employs, disciplinary actions or felonies, and the states where the firm is registered to do business.

This form also will detail how the firm's agents are compensated and will disclose business arrangements with other financial firms (brokers, securities dealers, etc.).

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Pay special attention to Item 5 and Item 11, says Peggy Cabaniss, CFP, president of HC Financial Advisors in Lafayette, Calif., and past national board chairwoman of the National Association of Personal Financial Advisors, or NAPFA. Item 5 gives information on the business itself; Item 11 will tell you if any of the firm's advisers have had problems with state or federal regulators or have been charged with or convicted of a felony in the past 10 years.

If you look up your Certified Financial Planner and find he's had to acknowledge charges, felonies or violations, "you have to have a conversation with the adviser to get an explanation," Cabaniss says. "And you should proceed cautiously."

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