Looking for the Right Financial Help

By Gerald Rome, Colorado Securities Commissioner ~

Last October, we talked about self-directed IRAs. Individual retirement accounts are nothing more than a holding account that may contain different kinds of assets, like stocks, bonds, real estate, and mutual funds. With a self-directed IRA, the IRS allows you to make your own investment decisions, meaning you decide what kind of stocks or mutual funds you want in your account. In our October column, we discussed some of the pitfalls of doing this. With the traditional IRA, or Roth IRA, financial professionals help make the decisions as to what products should be in your account. If you want to avoid the risks of a self-directed IRA, then your option is to hire a financial professional to help you make those decisions. Fortunately, there are thousands of financial services professionals who can help with financial decisions. However, finding the right financial services provider can be just as overwhelming as handling the money ourselves. But you can find the right financial help by answering a few simple questions.

Gerald Rome, Colorado Securities Commissioner

Gerald Rome, Securities Commissioner

Financial services providers fall into three categories; 1) investment advisers, 2) stockbrokers, and 3) financial planners. Investment advisers offer advice about investing in securities and may provide ongoing oversight and management of your portfolio of various investments. They charge you an annual percentage, usually below 2%, of the amount of money you have them manage. Stockbrokers help you buy and sell securities and may provide recommendations about your investments. You pay the stockbroker each time you buy or sell a security. Financial planners consider your entire financial situation and may develop a long-term, comprehensive financial plan by taking various factors into account such as insurance, taxes, estate planning, and investments. Financial planners can charge flat fees, hourly fees, or a fee for a particular service.

Investment advisers are required to put your interests ahead of theirs at all times by recommending investments they think are best for you. They are also required to tell you how they are paid and problems they have had with regulators. Stockbrokers are generally not required to put your interests ahead of theirs and are not required to give the same up-front disclosures, they are required to only recommend investments that are suitable for you. Finally, a financial planner’s requirements depend on the services they provide. They may be regulated as an investment adviser and/or stockbroker.

As an investor, you need to be vigilant. First, ask which licenses and titles the person you are dealing with has and make sure you independently verify what they mean and how they were awarded at www.finra.org/designations, or by calling us at 303-894-2320. Additionally, make sure your stockbroker or investment adviser is properly licensed by simply calling our office. Any reputable provider should be happy to discuss these issues with you and answer any questions you may have. For background information on investment advisers or stockbrokers, contact us at 303-894-2320.

For additional background information on stockbrokers, you can visit: http://brokercheck.finra.org.

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