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Your Choice of Financial Advisors Will Determine Your Success


Blindly acting on advice from others can be a sure way to lose money. Before you invest, learn about financial advisors and investments. Find out who you can trust to advise you on how stock markets work and about specific industries - especially those in which you may invest.

We’re bombarded by tips and financial advice that can cost us lots of money. We get them from friends, family, TV personalities, media pundits and financial gurus. Unfortunately, they’re often bad or too late. We’re told to invest in hot trends, bubbles involving certain companies or industries. But by the time we invest, everyone has bought in, the price has gone up and the bubble is about to burst.

Then there’s “inside information.” The brother-in-law of a woman who works at X Corp. gives your Uncle Jack a tip about a revolutionary new product that X Corp. is about to launch. According to the brother-in-law, “It will sell like hot cakes and just can’t miss.” So you, Uncle Jack and half your family buy X Corp’s stock, the new product bombs and you lose big.

Advice from professionals such as stockbrokers and financial advisors can also be dicey, especially when they work on a commission basis. Many financial advisors receive a commission on every transaction they make for their clients, regardless of whether those investments make or lose money. The advisors can’t lose, even though their clients often do.

Blindly acting on advice from others can be a sure way to lose money. Before you invest, learn about financial advisors and investments. Find out who you can trust to advise you on how stock markets work and about specific industries — especially those in which you may invest.

To familiarize yourself with the financial world, read publications such as the Wall Street Journal, Barron’s, The Financial Times, Money, Bloomberg Businessweek and Forbes. At first, you may feel as if you’re reading a foreign language, but stick with it because it will quickly begin to make sense and you’ll learn a great deal.

Check the Internet; lots of great information is available online. Market Watch, which is owned by Dow Jones, provides comprehensive financial news, commentary and market data. Other good sources are Yahoo Finance, MSN Money, CNN Money and Bloomberg.

Listen to my weekly radio program, "The Financial Physician", on WOMB-AM and on the Internet at

Watch out for titles. People are impressed by titles, which is why nearly 100 different financial-advisor designations now exist. The requirements for these titles differ greatly. Some take years of education, experience and continuing education, while others only mean that someone has taken a three-hour course.

It doesn’t take much to get a license to sell mutual funds or other securities and then call yourself a financial advisor. And the fact that a person or firm is licensed or registered does not guarantee success. Get recommendations and investigate any advisor before you do business with him or her.

It’s crucial to know what different financial-advisor titles mean and the qualifications for each. It can help you to decide whom to work with. Since so many financial advisor titles exist, I’ve highlighted few of the major designations and some easy and weaker ones.

1. Major designations

A. Certified Financial Planner (CFP):

This is the most prestigious financial-advisor designation. The basic requirements for a CFP are:

  • 3 years experience in the financial services industry and a bachelor’s degree or 5 years of financial planning experience.
  • Must pass a 2-day exam that covers financial planning, taxes, insurance, estate planning and retirement.
  • Maintain a high ethical conduct.
  • Complete 30 hours of continuing education every 2 years.

A CFP will understand all of the major financial categories: investments, insurance, estate planning, corporate benefits, retirement and income tax planning. He or she should be able to advise clients on most of their financial dealings and concerns. A CFP will know and can recommend other experts such as lawyers, accountants and insurance professionals.

Since most CFPs are also registered representatives (see below), working with a CFP may not cost more than dealing with a general stockbroker.

B. Registered Representative:

Also known as stockbrokers or account executives and will often refer to themselves as Financial Advisors. However, they are essentially securities sales people who are not required to have had financial planning training. Most work for brokerage firms and are registered with the Securities and Exchange Commission (SEC) and various stock exchanges. Registered representatives earn commissions on the securities they buy and sell for clients, so make sure that their recommendations are based on your financial interests, not theirs. To become a registered representative, candidates must:

  • Be associated with a stock exchange member broker/dealer firm. They earn commissions on securities they buy and sell for their clients
  • Pass securities exams. Exams differ based on the type of securities in which they wish to deal. Series 7 Exam allows sales people to sell General Securities such as stocks, bonds, mutual funds and variable annuities. Series 6 Exam only allows sales people to sell mutual funds and variable annuities.
  • Be registered with a member of the Financial Industry Regulatory Authority (FINRA) or a self-regulatory organization (SRO)
  • Be licensed in each state in which they conduct business.

To sell variable annuities requires at least a Series 6 securities license and a license to sell life insurance. Life insurance licenses are issued and regulated by the states, not the federal government.

C. Registered Investment Advisor (RIA):

An individual or firm that receives compensation for providing advice on securities must register with the SEC and/or state securities agencies as an investment advisor. Most RIAs charge management fees based on a percentage charged on the amount of assets they manage. In some instances RIAs will also be registered representatives and sell investments and charge a commission.

Current law states that advisors managing more than $25 million in assets have to be registered with the SEC, while those who manage less will register with their state’s securities dept.

D. Insurance Agents:

Insurance agents must be licensed by states where they sell life, health, property and/or casualty insurance as well as fixed and variable annuities. Exclusive agents only sell insurance products for one company while independent agents sell insurance products issued by more than one company.

2. Easy and weak designations

The following designations can be obtained with little effort and should be considered more as marketing tools than as evidence of ability, education and experience. A number of states have taken actions to regulate the use of designations that they deem deceptive.

A. Certified Senior Advisor (CSA):

Offered by the Society of Certified Senior Advisors, this designation implies that the advisor is well-educated in senior financial matters when in fact the curriculum only takes 3 1/2 days (or self-study) followed by an exam. It’s hard to believe that all that is needed to learn about the complexities of senior financial issues can be accomplished in only a few days.

B. Certified Senior Consultant (CSC):

Offered by the Institute of Business and Finance, this designation also implies a high degree of training in senior financial management. The designation is earned after completing only 25-30 hours of self-study and passing 3 final exams. Continuing education requirements are 15 hours per year for the first 5 years.

C. Certified Fund Specialist (CFS):

To be certified, an applicant only has to take a self-study course and pass three short exams. An applicant can receive this designation even though he or she is not licensed to sell mutual funds and does not have any continuing education requirements to maintain this designation.

A good financial advisor is as essential to your financial health as a good physician is to your physical health, so choose wisely. Hire a knowledgeable, well-rounded and respected financial advisor; one who has a good knowledge of estate planning, taxation, insurance, law and other related fields in addition to his or her investing expertise. Be sure that you:

  • Feel an overall trust and good comfort level with the advisor you select.
  • Have easy access to the advisor and he or she returns your calls promptly.
  • Communicate well with your advisor.
  • Trust that person to advise you on your finances.

Top financial advisors help their clients with everything in their financial lives including how they should buy their homes, the types of mortgage they should obtain and the right type of financing of their cars.

The choices of your financial advisors are the most important choices you are going to make, so choose wisely.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice