Selecting An Investment Advisor
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Selecting an Investment Advisor
Introduction
Choosing the right investment advisor is crucial for managing your savings effectively. This guide provides valuable insights into the financial services industry to help you understand the credentials you should look for in a financial professional. By exploring various licenses and certifications, you can determine which advisor best suits your needs.
Understanding the Roles
Investment professionals go by many titles?"Financial Advisor, Investment Consultant, Financial Planner, and more. They may work on a fee-based or commission-based model, often increasing client confusion. It's important to understand that a professional can hold multiple titles and perform various services, regardless of their compensation structure.
Licensing Bodies
The National Association of Securities Dealers (NASD) is a key self-regulatory body in the securities industry. The Securities and Exchange Commission (SEC) oversees the NASD and major exchanges like the New York Stock Exchange (NYSE). The NASD licenses Registered Representatives, while the SEC or state securities bureaus register Investment Advisors (RIAs). Financial Planners or Consultants are often termed RIAs as well. Insurance Agents, licensed by state Departments of Banking and Insurance, need an NASD license if they sell variable products.
Licenses and Certifications
- Series 65: Many professionals have at least a Series 65 license, which qualifies them as a Registered Investment Advisor in several states. This is the minimum requirement unless no license is held.
- Series 6: Required to become a Registered Representative, allowing the sale of mutual funds and securing an affiliation with a securities firm. An insurance license enables reps to offer variable products like annuities or universal life insurance.
- Series 7: Needed to advise and transact in stocks, bonds, REITs, limited partnerships, mutual funds, ETFs, and more. A Series 63 license is also required, along with disclosure of investment relationships to their broker/dealer. For assets over $25 million, registration with state securities bureaus or the SEC is necessary, permitting dual status as a Registered Representative and Investment Advisor.
Conclusion
Once established, an Investment Advisor can guide you on whether fee-based or commission-based compensation aligns with your financial goals. Choosing an advisor with the right credentials ensures your investments are in capable hands.
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