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Making sense of money advisers

A guide to professionals and services for your financial needs

Consumer Reports magazine: March 2013

Illustration: Leigh Wells

Tax season is a fine time to examine your finances, but do you need a broker or a registered investment adviser? And just what is a CPA? Here’s help.

Note that many advisers hold more than one designation or have extra qualifications, so it’s important to find out exactly which services an adviser will provide. Make sure your choice knows your overall financial situation, tolerance for risk, and investment objectives. And before you sign on, find out what he or she will charge (and whether it’s a flat fee or commission).

Check for disciplinary information at cfp.net/search, finra.org/brokercheck (also 800-289-9999), adviserinfo.sec.gov, or your state’s Board of Accountancy. For a listing of state boards, go to nysscpa.org/useful_links/state_boards.htm.

Broker. A person or company buying and selling stocks, bonds, and other securities for customers. Discount brokerage firms are usually cheaper than full-service firms, which are likely to offer more research and services. The sales people who are usually called brokers are more properly termed registered representatives. (They may also be called financial advisers—but that’s not the same as investment advisers; read on.) Before doing business, representatives must have registered with FINRA (the Financial Industry Regulatory Authority), passed an exam, and been licensed by a state securities regulator. The products they can sell vary with the license(s) they have.

Registered investment adviser. Someone paid for providing individually tailored advice about securities but not legally the same as a financial adviser or registered representative. The RIA is registered with the Securities and Exchange Commission or a state securities regulator. RIAs may also use other names: asset manager, investment counselor, portfolio manager, or wealth manager.

Accountant. Trained to help people or companies with taxes, financial planning, auditing, and other financial needs. Many states require new accountants to become Certified Public Accountants: They need to pass a national test and meet education and experience requirements set by a state Board of Accountancy. A Personal Financial Specialist is a CPA with specialized training and certification in personal finance.

Financial planner. “They could be brokers or investment advisers, insurance agents or practicing accountants,” FINRA says, “or they have no financial credentials at all.” A Certified Financial Planner has passed a 10-hour professional exam, has at least two years’ financial-planning experience, and has completed an approved course of study or has certain professional designations or academic degrees.

Other terms. For more info, check FINRA’s database, which explains more than 90 adviser or planner designations.

   

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