This is the second series of articles on considerations when selecting a financial professional. As you may recall from the last article, I wrote about brokers or registered representatives and investment advisors.

This is the second series of articles on considerations when selecting a financial professional. As you may recall from the last article, I wrote about brokers or registered representatives and investment advisors.

Brokers or registered representatives are licensed to sell securities through a broker-dealer. They are paid on commission.

They are regulated by the Financial Industry Regulatory Authority (FINRA). This organization sets and enforces polices that protect the public, ensures that anyone who sells securities is qualified and licensed, that securities' advertising is truthful, and that licensed securities are suitable for investors.

They have a website, If you go to this website, you can research your broker in terms of experience and if any complaints have been filed against them. They also have a section where you can research professional designations.
Investment advisors are regulated differently.
Depending on the size of their business or assets under management, they will be regulated either by the Security and Exchange Commission (SEC) or by their respective state Securities Commissioner.
You can go to the Kansas Office of the Securities Commissioner's website at to obtain information about an investment advisor. It will link you to the SEC website, where the database resides.

As you recall, advisors are typically paid on a fee-only or fee-basis. They are also required to make full disclosures about their background in terms of their business relationships and how they are paid.
Now, just to confuse everyone, some investment professionals are dual-registered as both brokers and investment advisors.
So, they are regulated by both FINRA and the SEC or state securities commissioner.
There is a new website out called BrightScope at It provides a quick snapshot of an investment advisor that is a little less clunky than the state and federal websites.
I checked it out for the first time while writing this article. It's kind of a gotcha for investment advisors because if I want to provide more current information to update my profile, I have to pay to play. If the advisor doesn't pay, then he or she is stuck with what BrightScope says.

Another interesting feature of this website is that you can research your 401(k) and see how it compares to other retirement plans in the same peer group. BrightScope is a leading independent provider of retirement plan ratings. So, I recommend you look up your retirement plan and see how they rate it.
The FINRA website also has a guide on how to select a potential investment professional. They recommend that when you visit with your investment professional that you talk about the following:

The advisor's registration or licenses.
What are the advisor's areas of specialization?
Products and services. Ask your advisor about the range of investments that they handle. Most advisors have investment tools they tend to favor, but be wary of advisors that only use one investment tool for all their clients.
Investment experience. Ask them how much experience they have, then go and check them out on the FINRA website. This is particularly important when it comes to investments. I think most people feel more comfortable with an advisor that has some experience and a track record of success.

See how they did in 2008 and 2009.
Professional credentials. You can also look up their professional credentials on the FINRA website. A certified financial planner (CFP) is the highest credential an advisor can possess. There are a number of designations that are worthless.
And, most importantly, ask how they get paid. I talked about this in my last column.

I would add that you might ask for references.
Lastly, you must be able to communicate effectively with your advisor. I don't mean just exchanging information. I mean communicating effectively so that you can reach a mutual understanding.

I have never been able to be an effective advisor with clients who have intermittent or guarded communications. So, make sure you feel comfortable talking to this person.

Previous articles are posted on my web page at If you would like to comment or make any suggestions, contact me at or call 651-4321.

Larry Martin is an investment advisor representative, offering advisory services through Mader & Shannon Wealth Management, Inc., 4505 Madison Ave., in Kansas City, Mo.