How to Find a Trustworthy Financial Professional

There are many stories in the news of accountants and financial managers stealing funds from clients. Understanding the certifications and degrees you should look for when selecting a financial professional will help you find trustworthy professionals. Also, understanding what situations to avoid when working with an accountant or financial advisor will help you as well.

One of the top licenses to check for is the CPA (Certified Public Accountant). The Certified Public Accountant license means that the person has the ability to provide accounting services to any member of the public. To obtain the CPA title, an individual must pass the Uniform Certified Public Accountant Examination, have 150-semester units of college education, and have one year of experience in accounting. Ideally, this person can ace the best CPA review courses thrown at them, but don’t let the perfect be the enemy of the good. If they’re licensed, they’re likely qualified.

The license is a prestigious license; if you see a financial professional with the license, you will know that you are dealing with someone who is knowledgeable about accounting (and can offer up some useful CPA exam tips if you or a loved one is thinking of accounting as a career.)

Another designation to check for is the CFP (Certified Financial Planner). A Certified Financial Planner is a designation for financial planners. To obtain a CFP, an individual must take 18 semester credit hours of courses, have a bachelor’s degree, and pass the CFP examination. The curriculum for the CFP includes financial planning, estate planning, asset protection, securities, and insurance planning. In finding a money manager you trust, checking for the CFP can be a good first step.

The CFA (Chartered Financial Analyst) is a professional certification that one can check if you are looking for an individual to work with your investments. To obtain a CFA, an individual must pass three examinations, have 4 years of work experience in investments, and become a member of the CFA Institute. The curriculum includes portfolio management, financial reporting, asset valuation, and financial modeling. You may not directly work with a CFA unless you are investing a large number of funds into investments as charter-holders generally work directly for institutions. However, you could check that the individuals managing the mutual fund or other types of funds where your money is being invested have the certification.

Once you have picked out either one person or multiple individuals that seem to be trustworthy professionals, you need to be aware of types of situations where your financial professional could possibly steal from you. Even if a preparer signs your tax form, you are still responsible that the form is accurate. Also, you are also responsible for any trades an advisor makes in your account if you have authorized him or her to trade on your behalf.

If your preparer wants you to sign a blank tax form or if an advisor wants to trade on your accounts without any sort of audits, you should be aware that these are the types of situations that your financial manager can easily steal from you. You should always monitor the work of your tax preparer and financial advisor.

In general, you should avoid a tax preparer who bases their fee on how large of a return they obtain. Tax preparers who earn their money in this way can be motivated to bend rules that are not in your best interest. For advisors, knowing exactly what is the right compensation plan can be somewhat more difficult.

You usually should avoid an advisor who is mostly compensated by commission from investments that he or she picks for you. Unless you are a very knowledgeable investor, picking an advisor who isn’t mostly based on commission is the correct choice. Picking an advisor who uses a third-party custodian such as Schwab, T.D. Ameritrade, Fidelity, or Pershing is a good idea. Using a third party custodian helps ensure that your funds are not stolen.

Finding a money manager you trust can be difficult. Picking a money manager who has credentials and avoiding some of the situations mentioned can help you successfully manage your money.

photo credit: wuestenigel Tablet and Pen via photopin (license)

Leave a Comment...