May 2013 North Central News

Page 16

Money Financial Advisor Motives: Shrouded in Secrecy By Sarah Maskill, CFP

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• People who have securities licenses are regulated by FINRA. These licenses are required to sell many types of financial products and accept commissions. You should know that these advisors have no responsibility to make recommendations based on your best interest. They have what’s called a “suitability standard.â€? As long as they sell you something that’s “suitable,â€? they’re in the clear. The majority of these advisors are ethical, hardworking people, but the conflict of interest from commissions is something you should be aware of. • People who are registered with the state’s Securities Department or the SEC as investment advisors have a fiduciary duty- meaning that they are required by law to act in your best interest, above their own or anyone else’s. These advisors typically charge you a percent of your accounts with them. There are also a small number of advisors who work on a retainer, or charge by the hour. • Some people are registered with a combination of regulators, so sometimes they’re required to act in your best interest, and sometimes not. Unless your new hobby is securities regulation, it’s smart to be suspicious of all kinds of advisors, no matter what type they are. You can check an advisor’s background on one website: http://brokercheck.finra.org/Search/Searc h.aspx. It will tell you if the advisor is regulated by the state, the SEC, or FINRA, and about the advisor’s credentials, disciplinary record, job history, licensing, and other information. Now that you’ve decided what type of advisor you want, and checked out his or her background, it’s time to ask some questions. • It’s never impolite to say, “What will this cost me? How are you paid?â€? Make sure your eyeballs actually see the fees in print. If the advisor says there are no fees, would you assume this person works for free? • If the sales pitch seems too good to be

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Americans are generally suspicious of the Wall Street crowd, and they should be. The financial markets are so complex now that even some of the most brazenly bad advice can be hard to spot. Here are some of the questions I get about financial advisors: • My emergency money is in a CD at the bank. A financial advisor told me to invest it so it would make more interest. Should I do this? • My mom is in her 80s, and dad just passed away. A financial advisor sold her a 10-year annuity‌is that OK? • I want to figure out what my retirement is going to look like, and the advisor told me to buy a variable annuity, since it’s guaranteed to pay me all the income I’ll need for the rest of my life. Is this right? It’s difficult to know if you’re dealing with a reputable advisor who is acting in your best interest and telling the truth. Bernie Madoff swindled thousands of individuals, banks, corporations, pension funds, universities, and charities. If those experts were fooled, what hope is there for us? First, know which type of advisor you’re working with.

EXAMINE/page 17

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