Getting Financial Advice: The Importance of Professional Financial Advice

If you have the time and the financial talent, you can manage your own financial portfolio. Many of us lack either of these essential qualities so prefer to use the services of a financial consultant. Choosing a financial consultant should be approached with care. A good financial consultant should have a proven track record and tailor financial advice to your unique goals and circumstances.

Financial Consultant Types

There are two main types of financial consultants: independent financial consultants and representatives of financial providers. The two types of consultant differ in terms of both fees and the type of financial advice they offer.

An independent financial consultant (IFC) charges for financial advice. The fee is most often a commission, although some consultants are willing to charge a set fee. Independent financial consultant fees may also involve other charges, depending on the financial advice offered. The consultant is obligated to inform you of any such charges. An independent financial consultant is not tied to any single company or financial group, so he can offer a broad range of financial advice.

A representative of a financial planner is paid by the company, bank, or insurance company he or she represents, so you don't have to pay for financial advice. The consultant will have detailed financial advice to offer about the company he or she represents. The consultant's ability to discuss financial advice that does not involve the parent company will be limited.

Finding a Financial Consultant

Choosing the right financial consultant is important: you have to be able to trust the consultant's integrity and honesty as well as his or her financial advice. Some things you should keep in mind when looking for a financial consultant:
  • Don't be afraid to interview a potential financial consultant; most consultants will appreciate how seriously you take your finances.
  • Ask for references from other clients, as well as a complete list of fees charged.
  • Check if the consultant is licensed by any state or federal agencies, or if any complaints have been lodged with the Better Business Bureau or similar organizations.

In order to give you appropriate financial advice, a financial consultant needs to know about your current finances, your financial needs, and your short and long-term goals. A good financial consultant should do the following:

  • Determine your present financial situation.
  • Discuss your personal financial goals.
  • Identify financial setbacks or difficulties that interfere with your goals.
  • Offer financial advice that includes alternatives and choices.
  • Be willing to alter financial advice as your goals or needs change.

Dealing with Bad Financial Advice

Bad financial advice can really hurt. Most people seem willing to accept financial advice from any source that seems credible. They don't take the time to investigate and evaluate those who offer financial services. However, if you think your broker or consultant defrauded you, you can file a complaint.

Two Valid Reasons for Taking Action

Misrepresentation: This occurs when a financial adviser makes untrue representation or omission of facts related to an investment. In short, you were told one thing and, after purchasing the investment, found out that it might not be the case.

Unsuitability: Were you persuaded to purchase an investment that's inconsistent with your objectives? For example, if you're on record as being risk-averse, did a broker steer you into an investment that's inappropriate to your risk tolerance?

How to Bring a Complaint

If you feel as if you've been victimized, complain in writing directly to your broker or investment adviser as soon as possible. Be very specific and send copies of all relevant documents. If you don't receive a satisfactory response, file an additional complaint with the appropriate regulatory agency.

For complaints against stockbrokers, file with the Securities Exchange Commission (SEC) or with the National Association of Securities Dealers (NASD). For complaints against a financial planner, file with the Certified Financial Planner (CFP) Board of Standards. These agencies will evaluate your complaint, investigate as necessary and will probably recommend courses of action.