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STATE OF CONNECTICUT DEPARTMENT OF BANKING

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STATE OF CONNECTICUT DEPARTMENT OF BANKING INVESTOR EDUCATION SERIES * Z is for Zero In on Your Finances Familiarize yourself with your financial plan Read your ... – PowerPoint PPT presentation

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Title: STATE OF CONNECTICUT DEPARTMENT OF BANKING


1
STATE OF CONNECTICUTDEPARTMENT OF BANKING
INVESTOR EDUCATION SERIES
2
Always Be Careful
  • When Choosing a Financial Planner

3
A 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

4
B 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

5
C 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

6
D 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)

7
E 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?

8
F is for Fees
  • There is no such thing as a free lunch
  • (that mailed dinner seminar invitation
  • notwithstanding!)

9
Fee 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

10
Commissions
  • 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

11
Fees and Commissions
  • Planner receives both
  • Also called fee based or fee offset
  • Watch out for other fees (initial consultation
    fee follow-up review fee)

12
Wrap 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

13
G is for Guaranteed Profits
  • If your planner guarantees profits
  • RUN TO THE NEAREST EXIT!

14
H is for High Return/No Risk
  • If you planner tells you a product
  • has no risk and high returns
  • HES LYING

15
I 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

16
Common Designations
  • CFP (Certified Financial Planner)
  • ChFC (Chartered Financial Consultant
  • insurance)
  • PFS (Personal Financial Specialist
  • CPAs)
  • CFA (Chartered Financial Analyst
  • securities)

17
R.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

18
J 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.

19
K 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

20
L 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

21
M 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!

22
N 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

23
O 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)

24
P 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

25
Q is for Question
  • Ask the planner as many questions
  • as you want after all, hell be working
  • for YOU

26
R is for Risk Assessment
  • Before you meet with the planner,
  • think about how much investment risk
  • you are able to bear

27
S 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

28
T 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.

29
U 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

30
V is for Variety
  • Interview several planners before
  • deciding on one

31
W 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

32
X 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

33
Y is for You Are in Control
  • Make the Adviser
  • WORK
  • For Your Business

34
Z 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

35
Connecticut Department of Banking
  • Securities and Business Investments Division
  • 860-240-8230
  • Toll-free 1-800-831-7225
  • www.ct.gov/dob
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