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How to chose financial advisors wisely
Unethical Advisors By: Lou Scatigna January, 2010
I’m Lou Scatigna, national radio talk show host and author of the book “The Financial Physician: How to cure your money problems and boost your financial health.” One of the more common financial ailments that Americans face is having an incompetent or unethical financial advisor. A good financial advisor is as essential to your financial health as a medical doctor is to your physical health so it’s very important that we choose one carefully. There are a number of different types of financial advisors available to you so let’s go over the different types.
? The Stock Broker, also knows as the Registered Representative. They work for brokerage houses and investment firms. How does someone get licensed to become a registered representative? They take a self-study course and then they take an exam. It’s a pretty difficult exam, but it’s an exam nonetheless. They’re now licensed. There are no further requirements to being a stock broker, and what they usually do is sell mutual funds and stocks and earn commissions on the transactions.
? The second type of financial advisor and the most educated is the Certified Financial Planner. A CFP has to go through an extensive education program covering income taxes, investments, insurance, and estate and retirement planning. A Certified Financial Planner can also be a Registered Representative or Stock Broker.
? The next financial advisor that you may deal with is an Insurance Agent. Insurance Agents are licensed with each individual state. They take a test, and then they become a Life Insurance Agent. They can also sell annuities or variable annuities.
Financial advisors are also compensated in 2 different ways. Some advisors are compensated on commission. They get paid commissions based upon the products that they sell. Other advisors are compensated by fees. They receive fees based upon either a percent of the assets that they manage for their client, or an hourly fee.
Which is better? I prefer the fee based advisor. He’s more independent. He’s not driven by how much money he’s going to make based on a product that he’s going to sell you. Many financial advisors sell annuities. I feel that a lot of annuities are sold to people specifically because they pay the highest commissions of any investment product. A fee based financial advisor is your partner. If your account goes up in value his fees go up as well since he’s getting a percent of your account. If your account goes down in value, he’s going to make less money. He has more incentive to do well for you.
Now, how do you pick a financial advisor? The most important thing is experience. The older the advisor or the longer he’s been in the business, the better the chance that you’ll get someone that knows what they’re doing. Also, pick a Certified Financial Planner – the highest designation in financial advice. Lastly, find out how they are compensated. I think you should go with a fee-based financial advisor.
Learn more about financial advisors in my book, “The Financial Physician: How to cure your money problems and boost your financial health” and visit my website at http://www.thefinancialphysician.com
Louis G. Scatigna, CFP, is financial expert who excels at clearly explaining complex fiscal matters. Since 1983 he has been a financial advisor and a licensed investment broker and since 1987 a tax accountant. In 1987, Lou founded AFM Investments, Inc., a full service financial planning, tax preparation and investment firm in Howell, New Jersey, where he serves as the President and CEO.
For over 10 years, Lou has hosted the top rated radio program, The Financial Physician, in which he answers listeners' telephone questions on their financial concerns. Lou gives his audience straightforward tough love and stresses the importance of financial responsibility and financial literacy. His unorthodox approach has made him a maverick who does not hesitate to question and challenge both trendy and traditionally accepted financial-industry views. He warned of the present financial crises more than two years ago. Lou's radio programs can be found on his radio show website (www.thefinancialphysician.com.) He also provides additional comments and advice on his daily blog.
At AFM Investments (800-732-5250), a 22-year old financial advisory firm, Lou provides financial advice to many families and specializes in senior financial issues. Lou's advice is built on rock-solid research and information and based on well-reasoned approaches that have consistently passed the test of time. He excels at explaining and demystifying complex financial matters and putting them in clear, direct language that everyone can quickly grasp.
A dynamic and popular speaker, Lou has been quoted in numerous newspapers including USA Today. He has also been a frequent guest on New York City radio and TV programs. He has become a self-made, multi-millionaire and philanthropist who is devoted to helping the less fortunate. Recently, he completed the pilot for a reality-television program called Operation Rescue that he hosts (www.thefinancialphysician.com). Each week, audiences will see Lou putting together resources and rescuing actual families that are struggling through deep financial crisis and dire need. This feel-good, docudrama spotlights Lou's caring, resourcefulness, determination and appeal.
A native of Howell, NJ, Lou is a graduate of Rutgers University. He is married to Susan, his high-school sweetheart, and they have two children, Matthew and Michelle. They currently reside at the Jersey Shore.
AFM Investments, Inc. is service financial planning firm. Securities transactions through Leigh Baldwin & Co, member FINRA and SIPC. Registered Advisory services are through Summit Alliance.
Copyright 2010 - Lou Scatigna
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