| Bernie Madoff's death last week put him back in the news.
And that was a good thing, because stories were again resurfaced and reported and brought to everyone's attention about the man who was the mastermind behind the biggest investment fraud in U.S. history. Those stories should serve as important lessons for all investors.
Of course, a majority of Madoff's victims were celebrities and the very wealthy. The takeaway, however, is you don't have to be famous and uber-rich to get ripped off. It could happen to anyone.
So, what can an investor do to make sure they are hiring a reputable financial professional?
I spoke with a few financial advisors and they offered some good guidance. To start, investors need to thoroughly vet prospective advisors, and that starts with asking the right questions. Of course, most investors know that they should do some research before engaging the services of a financial advisor. The problem is they don't know how to do it, these experts say.
Vetting a financial advisor doesn't have to be a daunting task.
Set up interviews with several advisors and, before meeting with them, you should check out their website and social media profiles. If you can't find a clear message about who they are, what services they offer and what fees they charge for their services, you may decide to cancel that initial meeting.
Experts also suggest you work your personal network. Talk to people whom you truly trust and see who they use for financial advice and ask them for a referral.
Here are some other things to do during your advisor interview process: Prepare a detailed checklist of interview questions; clarify the services you need (like cash management and budgeting, tax planning, estate planning, insurance needs or retirement planning); clarify the fees for those services; and ask for client references and check them.
Here are some key questions to ask the advisor on that interview: Who pays you? How do you make your money? Are any commissions or third-party payments involved whatsoever? Who is custodian over the funds? What are your professional qualifications? Are you a fiduciary and how do you define "fiduciary"? What is your investment philosophy? How does it work in practice?
Finally, an easy way to check out an investment professional is to use the SEC's free search tool. By utilizing the SEC's Investment Adviser site, any investor can find key information about a financial advisor or an advisory firm.
The bottom line is this: It's your hard-earned money, so take the time to do your research to find a trusted person to help you invest and manage that money.
For more key stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. |
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