Working With an Investment Professional

Have you experienced a major event in your life that has changed your financial situation? Are you looking beyond a traditional savings account to begin to invest in stocks, bonds or other investment products? Perhaps you’re looking for someone to help develop a road map for your financial future. These and other situations might make you consider contacting an investment professional.

Qualified investment professionals can help you make sound financial decisions. We’ll help you understand the types of professionals you might encounter, their qualifications, and how to check them out before you take their advice or entrust them with your money. In addition, investment professionals might hold a variety of professional designations and credentials. Use our Professional Designations Database to find out more about the letters that sometimes follow a financial professional’s name.

Types of Investment Professionals

The services you receive, fees you pay and even the investments you’re offered will vary depending on the type of professional you select. Below are the most common types of investment professionals and key functions. Follow the links to learn more about each.

Registered Financial Professionals

Registered financial professionals buy and sell securities for their customers, including individual investors. They’re regulated by FINRA and the SEC. Learn more.

Investment Advisers

Investment advisers provide advice about securities tailored to the needs of their clients. They’re regulated by the SEC or state securities regulators. Learn more.

Financial Planners

Financial planners provide an array of financial services that vary from provider to provider. Regulation and licensing depend on the services offered. Learn more.

Insurance Agents

Insurance agents sell life, health and property insurance policies and other insurance products, including annuities. They’re regulated by state insurance commissions. Learn more.

Accountants

Accountants provide professional assistance with taxes and financial planning, tax reporting, auditing and management consulting. They’re regulated by national and state licensing standards. Learn more.

Lawyers

Lawyers offer legal assistance to clients related to financial planning and investment decisions and may represent clients in disputes with firms or investment professionals. They’re regulated by state bar associations. Learn more.

Choosing an Investment Professional

A good place to start when shopping for an investment professional is to ask family, friends and colleagues who already invest for the names of people they’ve used. Even if you get a good recommendation, though, do your own independent review of the investment professional to make sure they’re the right person to meet your needs. The following actions will help you make a sound choice:

Do an internet search of the investment professional and their firm, including checking to see if an individual has a criminal record. Do this before you sign any documents, make any investments or turn over any money.

Work with registered firms and individuals. A vital step in selecting an investment professional is to see if the individual and their firm are registered. BrokerCheck is a good place to start when researching professionals who sell securities, provide advice or both. It provides an overview of an individual’s work history, as well as their firm’s history. It’s a good idea to also consult your state securities regulator.

For other professionals, check the bar association or other licensing or regulatory entity, especially if an individual or firm isn’t found in BrokerCheck. For example, learn more about commodities, futures and other derivatives professionals from the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA), and use the National Mortgage Licensing System (NMLS) to search for licensed mortgage professionals.

For more information, use our Ask and Check resource. The SEC also has helpful information and tips on how to select an investment professional.

Ask key questions. These include:

• What experience do you have working with people like me?
• Who are you registered with and in what capacity? Do you hold any other professional credentials?
• Do you have any disciplinary actions, arbitration awards or customer complaints? If so, please explain them. (Also compare their responses to information found in BrokerCheck and other third-party sources.)
• Do you or your firm have an overarching investment philosophy?
• What type of investment products and services do you offer? Are there any products or services you don’t offer? Why?
• Do you or your firm impose any minimum account balances on customers? If so, what happens if my portfolio falls below the minimum?
• How do you get paid? Do you receive commissions on products I buy or sell? A percentage of the amount of my assets you manage? A flat or an hourly fee? Any other method?

Articulate your financial goals and objectives. Explain what you hope to accomplish financially and over what time frame(s). Level with your professional about your investing experience and the amount of risk you’re willing to take.

Don’t give in to pressure. Steer clear of any investment professional who pushes you to invest quickly or refuses to provide information for you to consider carefully. Be alert to high pressure tactics that are frequently used by financial fraudsters.

Use caution if you get a “cold call.” Be wary of unsolicited communications—regardless of the channel used—and exaggerated claims (e.g., "your money will double in six months"), and never send money to a firm or individual that you’re hearing from for the first time simply based on a sales pitch or free lunch.

A Successful Partnership

Once you select an investment professional, it’s a good idea to keep in contact on a regular basis and touch base if you experience a life change. In addition, taking the following steps can help ensure that you maintain a productive relationship with your investment professional:

• Do your own homework. If an investment has been recommended, request a prospectus, regulatory filings or research information, and read materials carefully. Discuss potential risks and rewards with your professional.
• Discuss fees. These may include sales commissions, subscription-based fees, markups or markdowns, administrative and management charges, and costs associated with the sale or redemption of an investment. Understanding fee arrangements is also essential in evaluating a professional's independence in making investment recommendations—ask whether the person or their firm will receive any additional compensation for selling you a particular product, service or type of account.
• Define your needs. For example, consider how much and what type of advice you want, as well as how often you intend to trade. If you trade fairly often, you might save money using a fee-based account, which may entitle you to additional advice or services from your investment professional than a commission-based account. That's less likely to be the case if you trade only rarely—or if you trade primarily through an account with low or zero commissions.
• Read and retain your monthly account statements, confirmations and any other information you receive about your investment transactions.
• Contact your investment professional immediately about any transaction you didn’t authorize or item on the account statement that you don’t understand. Notify the firm's compliance department in writing if you’re unsatisfied with your investment professional’s response.
• Let your investment team know of any significant changes in your income, time horizon, risk tolerance or other factors that might impact your financial situation. For instance, the birth of a child might mean you connect with a lawyer to make or change a will, and with a registered financial professional or investment adviser regarding saving and investing for college.
• If you suspect improper business conduct at any time during your working relationship, contact the firm's compliance department in writing. Retain a copy of your letter and other related correspondence with the firm. If you don’t receive a satisfactory response to your complaint from the firm, contact FINRA.