How Should I Prepare?

Selecting an investment advisor is a big decision. As with all important choices, you have to do your homework. What preparations should you make?

Educate yourself about the financial services industry.

That’s not as easy as it sounds. Some firms want to control what you know and the way you think, particularly if it means that they can get their hands on your money. How can you get reliable information?

Look for information supplied by organizations that advocate for the rights of investors. One excellent source is the CFA Institute (formerly AIMR).

Read information supplied by government regulatory agencies, such as the Securities and Exchange Commission (SEC).

Investor, know thyself!

One of the most important ways to prepare for choosing an investment advisor is to reflect on your own values and personal style. Ask yourself:

Do you want investment advice only or do you also want to hand control of your portfolio over to your investment advisor?

Do you know your own tolerance for investment risk?

What kind of communication with your investment advisor will make you feel most comfortable?

How much ongoing education will you want?

Do you have personal convictions that constrain the way you want to invest your money?

Background checks are vital.

There are quite a few ways that you can find the names of potential investment advisors and also get information about them. Here are a few of those ways.

Speaking with friends who already have investment advisors generates names and helpful information. There is no match for personal experience and recommendations from people you trust.

Some large brokerage firms (such as Charles Schwab and Fidelity Investments) evaluate investment advisory firms. This helps them make financial advisor recommendations with confidence.

Check out potential advisors using the Investor Information service of the SEC. Ask advisors for Part II of their “Form-ADV,” which contains necessary disclosures.