As you look for an adviser, one of the things you want to check is how qualified the person is to do the job. That's not as easy as it could be, since there's no single credential — like a doctor's MD or a certified public accountant's CPA — that a financial adviser must have.
The most stringent requirements are for brokerage firm employees who sell securities. To be registered representatives (RR), they must pass an exam administered by the
Financial Industry Regulatory Authority (FINRA).
However, that exam tests securities law rather than financial planning expertise.
RRs must also be listed with the
Securities and Exchange Commission (SEC)
as registered investment advisers (RIAs) or with the securities agencies in the states
where they work.
You can easily access registered advisers' files, Part II of Form ADV, which contain summaries of their backgrounds and fees. If your adviser is on the list, you can ask to see his or her form by calling the SEC Public Reference Branch. Part I of the form will report certain disciplinary actions against the adviser, but not current complaints, if there are any. FINRA, in association with each state, also tracks credentials of registered advisers.
On February 8, 1995, the Securities and Exchange Commission (SEC) approved self-regulatory organization (SRO) rules that established a formal, two-part, industry-wide Continuing Education Program. The Program is comprised of the Regulatory Element and the Firm Element. Registered representatives must obtain credit for both of these elements in order to maintain their professional licenses.
