How to Run a Background Check on Your Financial Planner

October 4, 2022

A financial planner can help you achieve your financial goals, whether those goals are paying for your children’s college, retiring early, or funding a trip around the world.

However, carefully vetting planners is imperative because they have access to your personally identifying information and, more importantly, your life savings.

Since the Bernie Madoff scandal, people have looked at their financial advisors more discerningly, as they should. One way to protect yourself from losing thousands, if not millions, as Bernie Madoff’s victims did, is to run a background check on your financial planner.

Referrals, Reviews, and a Background Check?

Often, the best financial advisors are found via word of mouth. If you get the name of a financial planner that some of your friends and relatives use, you may next look at online reviews to get the opinions of others outside your social circle.

That is where most people stop investigating. If the referrals and reviews are good, and they meet with the financial planner themselves, they may start working with the person. But not so fast. One additional way to protect yourself is to run a background check.

How to Run a Background Check on Your Financial Planner

First, you can use TruthFinder to dig deeply into your prospective financial planner’s background. This site allows you to run a search on someone with as little as their name, address, phone number, or email address. TruthFinder will scour the web more deeply than Google to find information such as criminal, arrest, and traffic records, It also checks education, job history, social media profiles, and more.

In addition to utilizing TruthFinder, you can dig deeper into your financial planner’s background with public information.

Is Your Planner a CFP?

To get the designation of CFP (Certified Financial Planner), the individual must pass a comprehensive exam. He also must regularly continue his education. This is the premier certification and one you should look for.

Does Your Planner Pledge Fiduciary Duty?

If so, the planner acts in your best interest. Not all planners take this pledge.

How Is Your Planner Paid?

Is the planner paid hourly, on commission, or by flat fee? In my experience, those paid by commission often steer clients towards the products that earn the most commission but aren’t necessarily in the client’s best interest. So, you may want to avoid a planner paid on commission.

After you’ve obtained public information on your financial planner, you may feel much more comfortable working with the person. If not, you can dig deeper.

Obtain a Copy of Their Form ADV Part 1

You can go to the SEC website and get a copy of your prospective financial planner’s Form ADV Part 1. The information on this form will tell you whether your planner has had any issues reported, whether from clients or regulators.

Check the CFP Board List of Disciplined Members

If the prospective financial planner is a CFP, you can go to the CFP Board website and search by state for members the CFP Board has had to discipline. Any disciplined Certified Financial Planner, past or present, will be listed.

Final Thoughts

A financial planner can help you reach, or potentially exceed, your financial goals. However, before you agree to work with one, do your due diligence and carefully vet your financial planner. Doing so will allow you to rest easy, knowing you have the best financial planner you could find.

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