How To Choose A Financial Advisor

What’s in a Title
Know Your Advisor
Preventing Fraud


Managing money is often one of the hardest, most stressful parts of life. Having sufficient funds when you need them makes a tremendous difference in life. Yet, most of us receive little, if any, education on how to make the right financial decisions.  From knowing how to set aside money and to invest effectively, to making the best financial decisions and having your savings last throughout retirement are areas where working with an investment advisor can make all the difference.

There are so many sources of financial and investing advice. And there's so much information to digest - in the media, in investment newsletters, from friends and associates. People often ask us how to know whom to trust and how to separate trustworthy advice from misinformation.

Before you hire any financial professional, you should know exactly what services you need, what services the professional can deliver, any limitations on what they can recommend, what services you're paying for, how much those services cost, and how the adviser or planner gets paid.

Behind the Title

A title is not a guarantee of ability, but it does establish certain legal standards. Anyone can call themselves a financial advisor, financial consultant, money manager or financial planner. There are no educational requirements. However, under the Uniform Securities Act, anyone “who solicits, offers, or negotiates for the sale of or sells investment advisory services” must register as an investment adviser within the state or states where they have clients and, once they reach a specific asset size, with the U.S. Securities and Exchange Commission.

To be a Certified Financial PlannerTM or CFP® practitioner, the individual must complete a comprehensive course of study at a college or university offering a personal financial planning curriculum approved by CFP Board and pass the comprehensive CFP® Certification Exam, which tests their ability to apply financial planning knowledge to real-life situations. Before they can use the CFP® mark, they must have a minimum of three years experience in the financial planning process. This hands-on experience guarantees that CFP® professionals have practical financial planning knowledge. Certified Financial Planner™ professionals are held to the CFP Board's Code of Ethics, which outlines CFP® professionals' obligations to uphold principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence. And the Rules of Conduct require CFP® professionals to put your interests above their own and to provide their financial planning services as a "fiduciary" — acting in the best interest of their financial planning clients. You can verify that an individual is a CFP® by visiting the CFP Board’s Registry.

A Registered Investment Advisor (RIA) must be registered with the Securities and Exchange Commission (SEC) and/or any states in which he or she operates. Most RIAs are partnerships or corporations, but individuals can also register as RIAs. RIAs are governed under the Investment Advisers Act of 1940, which establishes the requirement that the RIA act as a fiduciary, creating a fundamental obligation to act in the best interests of one’s clients and to provide investment advice in the clients’ best interests. Information on RIAs, including disciplinary history, can be found on the SEC Investment Adviser Registration Depository (IARD)  Find out more about the RIA’s legal obligations.

An Investment Adviser Representative generally is an employee of an RIA firm who, for compensation (1) makes any recommendations or otherwise renders advice regarding securities; (2) manages accounts or portfolios of clients; (3) determines which recommendation or advice regarding securities should be given; (4) solicits, offers, or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing. Only states register investment adviser representatives, not the SEC, but those who must be registered include individuals working for both state and SEC-registered firms. 

 Investment Brokers or Registered Representatives work for brokers-dealers. The SEC defines a broker as someone who acts as an agent for someone else, and a dealer as someone who acts as a principal for their own account. Broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA) under standards that require them to make suitable recommendations to their clients. The suitability standard only details that the broker-dealer has to reasonably believe that any recommendations made are suitable for clients, in terms of the client's financial needs, objectives and unique circumstances. A broker's duty is to the broker-dealer he or she works for, not necessarily the client served.  FINRA provides BrokerCheck, a free, on-line tool to help investors research the professional backgrounds of brokerage firms and brokers currently or formerly registered with FINRA or a national securities exchange, as well as current or former investment adviser firms and representatives. Visit BrokerCheck.

Know Your Advisor

Before you work with an advisor, make certain you know the individual. And, in the words of a Russian proverb, “Trust, but verify.”

  • What experience do you have, especially with people in my circumstances?
  • Where did you go to school? What is your recent employment history?
  • What licenses do you hold? Are you registered with the SEC, a state, or the Financial Industry Regulatory Authority (FINRA )?
  • What products and services do you offer?
  • Can you only recommend a limited number of products or services to me? If so, why?
  • How are you paid for your services? What is your usual hourly rate, flat fee, or commission?
  • Have you ever been disciplined by any government regulator for unethical or improper conduct or been sued by a client who was not happy with the work you did?
  • For registered investment advisers, will you send me a copy of both parts of your Form ADV?

Then, check the appropriate registry

Certified Financial PlannerTM -

Registered Investment Adviser -

Securities Broker -

Investment Adviser Representative -

If the individual is not registered, consider it a red flag.


Preventing Fraud

Ultimately, preventing fraud comes down to the investor. We recommend you look for the following in your financial relationships:

  • Assets are held in your name at a reputable custodian and covered by SIPC insurance against loss of cash and securities should the custodial firm encounter problems due to mismanagement. It should be noted that this coverage does not protect against market volatility and loss of principal due to market performance.  
  • At no time does the adviser have access to your funds other than pre-authorized payment of management fees. Deposits should always be payable to the custodian firm.
  • The ability to set alerts at the custodian regarding any changes to your account from address and contact information to withdrawals.
  • Transparency, i.e. the ability to check the status of your account at any time online.
  • At minimum, quarterly statements provided by the custodian, not just the financial adviser. Review statements promptly and contact the custodian if anything seems inappropriate.

Nothing holds truer in investing than the statement “If it sounds too good to be true, it probably isn’t.” All investing has the risk of loss as well as gain. The use of the word “guaranteed” should be considered a red flag.

At Prairie Investment Advisors, accounts are held in the individual client’s name at one of the nation’s largest custodial and brokerage firms; TD Ameritrade Institutional - selected for quality of service and cost effectiveness. In addition to account transparency, independent transaction confirmations, quarterly statements and online access provided by the custodian, all accounts are SIPC insured up to $500,000. TD Ameritrade also carries additional insurance coverage through Lloyds of London that protects your accounts up to $149.5 million against the loss of cash and securities should the custodial firm encounter problems due to mismanagement.

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck