Title: STATE OF CONNECTICUT DEPARTMENT OF BANKING
1STATE OF CONNECTICUTDEPARTMENT OF BANKING
INVESTOR EDUCATION SERIES
2Always Be Careful
- When Choosing a Financial Planner
3A is for Advice
- What kind do you need?
- Examples Securities, Taxes, Estate Planning,
Insurance - Planners giving advice on securities for
compensation must be registered with - the State of Connecticut Dept. of
- Banking or the SEC
4B is for Background Check
- Find out if the planner has any disciplinary
history (lawsuits regulatory actions) - You can do an online check, or we will send or
e-mail you the information - We do not tip off the planner that you
- are asking for information
5C is for Conflicts of Interest
- Planners must tell you about any conflicts of
interest that prevent them from giving you
unbiased advice - Example Planner also works for a brokerage firm
and gets commissions - for securities product sales
6D is for Disclosure
- By law, investment advisers must give you a
disclosure document (brochure) describing their
compensation, background, investment strategies,
services and areas of expertise - You should receive the brochure prior to, or when
you sign the contract (you have 5 days to cancel
the contract if you get the brochure at the time
of contract signing)
7E is for Experience
- How long has the planner been giving investment
advice? - Does the planner have experience in
- your area of interest?
- What is the planners work history?
8F is for Fees
- There is no such thing as a free lunch
- (that mailed dinner seminar invitation
- notwithstanding!)
9Fee Only Planners
- Only get paid for giving advice
- Does not matter if you follow the advice
- and buy a securities product
- Usually an hourly charge or by project
10Commissions
- Paid to a securities product seller (like
- a broker-dealer) for buying or selling
- securities
- Decrease your total investment
- Planners can get commissions if they
- are also associated with a brokerage firm
11Fees and Commissions
- Planner receives both
- Also called fee based or fee offset
- Watch out for other fees (initial consultation
fee follow-up review fee)
12Wrap Fees
- You get a bundled set of investment services
(brokerage advice) for a set fee - Planner may get a portion of the wrap fee you pay
to the product sponsor
13G is for Guaranteed Profits
- If your planner guarantees profits
- RUN TO THE NEAREST EXIT!
14H is for High Return/No Risk
- If you planner tells you a product
- has no risk and high returns
- HES LYING
15I is for Industry Designations
- Show that the planner is pursuing
- continuing education in her field
- But beware of titles suggesting a
- specialty in seniors affairs
16Common Designations
- CFP (Certified Financial Planner)
- ChFC (Chartered Financial Consultant
- insurance)
- PFS (Personal Financial Specialist
- CPAs)
- CFA (Chartered Financial Analyst
- securities)
17R.I.A.
- Stands for Registered Investment Adviser
- Not an industry conferred designation
- Just because an adviser is registered
- with Connecticut (or with the SEC) does not
mean that the government has given him its stamp
of approval
18J is for Jawboning
- Beware of planners who brag about their past
performance - Unscrupulous planners prey on your greed,
reluctance to object, guilt, unwillingness to
look dumb, etc.
19K is for Know Your Client
- By law, investment advisers have a fiduciary duty
to recommend products - that align with your financial goals and
- risk tolerance
20L is for Liquidity
- Tell your planner if you need ready access to
funds (e.g. to pay bills) - If you need to access your funds, long-
- term or locked up investments are not
- for you
21M is for Multiple Hats
- Your planner must tell you if she is working for
multiple firms (e.g. selling securities products
for a brokerage firm) - It is not uncommon for brokerage firms to set up
shop in banks looks arent everything!
22N is for Number of Clients
- Ask the planner how many clients he has, and
whether he only services high- - income clients
- Beware if his only experience is managing his own
securities portfolio
23O is For One Size Fits All Plans
- Ask to see a sample of financial plans
- the financial planner has prepared
- Beware if the plans look the same
- or recommend the same product(s)
24P is For Personal Attention
- Ask the planner whether she (or an
- assistant) will be working with you
- If youll be working with an assistant, do the
same background check and homework on the
assistant that youd do on the financial planner
25Q is for Question
- Ask the planner as many questions
- as you want after all, hell be working
- for YOU
26R is for Risk Assessment
- Before you meet with the planner,
- think about how much investment risk
- you are able to bear
27S is for Schooling (and Services)
- Did the planner graduate from the Wharton School
of Business or the - local academy of hair design?
- Nail down the planner on precisely what services
he will provide
28T is for Take Your Time
- You dont have to follow the planners
recommendations right away - If the planner pressures you to buy
- a particular product, be wary.
29U is for Understand the Strategies
- Beware of the Einstein Effect the planner
telling you that the investment strategy is so
complicated, only he understands it
30V is for Variety
- Interview several planners before
- deciding on one
31W is for Writing (Get it in)
- Ask for a copy of the advisers
- brochure and read it beforehand
- Review the advisory contract before
- you sign it
32X is for X Marks the Spot
- Dont give the adviser discretion
- the ability to trade securities for you
- without your permission without
- granting that authority in writingand
thinking it through
33Y is for You Are in Control
- Make the Adviser
- WORK
-
- For Your Business
34Z is for Zero In on Your Finances
- Familiarize yourself with your financial
- plan
- Read your account statements carefully
- Keep up-to-speed on finance byreading newspapers
and periodicals
35Connecticut Department of Banking
- Securities and Business Investments Division
- 860-240-8230
- Toll-free 1-800-831-7225
- www.ct.gov/dob