STATE OF CONNECTICUT DEPARTMENT OF BANKING

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STATE OF CONNECTICUTDEPARTMENT OF BANKING
INVESTOR EDUCATION SERIES
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Always Be Careful

• When Choosing a Financial Planner

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A is for Advice

• What kind do you need?
• Examples Securities, Taxes, Estate Planning,
  Insurance
• Planners giving advice on securities for
  compensation must be registered with
• the State of Connecticut Dept. of
• Banking or the SEC

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B is for Background Check

• Find out if the planner has any disciplinary
  history (lawsuits regulatory actions)
• You can do an online check, or we will send or
  e-mail you the information
• We do not tip off the planner that you
• are asking for information

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C is for Conflicts of Interest

• Planners must tell you about any conflicts of
  interest that prevent them from giving you
  unbiased advice
• Example Planner also works for a brokerage firm
  and gets commissions
• for securities product sales

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D is for Disclosure

• By law, investment advisers must give you a
  disclosure document (brochure) describing their
  compensation, background, investment strategies,
  services and areas of expertise
• You should receive the brochure prior to, or when
  you sign the contract (you have 5 days to cancel
  the contract if you get the brochure at the time
  of contract signing)

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E is for Experience

• How long has the planner been giving investment
  advice?
• Does the planner have experience in
• your area of interest?
• What is the planners work history?

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F is for Fees

• There is no such thing as a free lunch
• (that mailed dinner seminar invitation
• notwithstanding!)

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Fee Only Planners

• Only get paid for giving advice
• Does not matter if you follow the advice
• and buy a securities product
• Usually an hourly charge or by project

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Commissions

• Paid to a securities product seller (like
• a broker-dealer) for buying or selling
• securities
• Decrease your total investment
• Planners can get commissions if they
• are also associated with a brokerage firm

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Fees and Commissions

• Planner receives both
• Also called fee based or fee offset
• Watch out for other fees (initial consultation
  fee follow-up review fee)

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Wrap Fees

• You get a bundled set of investment services
  (brokerage advice) for a set fee
• Planner may get a portion of the wrap fee you pay
  to the product sponsor

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G is for Guaranteed Profits

• If your planner guarantees profits
• RUN TO THE NEAREST EXIT!

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H is for High Return/No Risk

• If you planner tells you a product
• has no risk and high returns
• HES LYING

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I is for Industry Designations

• Show that the planner is pursuing
• continuing education in her field
• But beware of titles suggesting a
• specialty in seniors affairs

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Common Designations

• CFP (Certified Financial Planner)
• ChFC (Chartered Financial Consultant
• insurance)
• PFS (Personal Financial Specialist
• CPAs)
• CFA (Chartered Financial Analyst
• securities)

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R.I.A.

• Stands for Registered Investment Adviser
• Not an industry conferred designation
• Just because an adviser is registered
• with Connecticut (or with the SEC) does not
  mean that the government has given him its stamp
  of approval

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J is for Jawboning

• Beware of planners who brag about their past
  performance
• Unscrupulous planners prey on your greed,
  reluctance to object, guilt, unwillingness to
  look dumb, etc.

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K is for Know Your Client

• By law, investment advisers have a fiduciary duty
  to recommend products
• that align with your financial goals and
• risk tolerance

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L is for Liquidity

• Tell your planner if you need ready access to
  funds (e.g. to pay bills)
• If you need to access your funds, long-
• term or locked up investments are not
• for you

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M is for Multiple Hats

• Your planner must tell you if she is working for
  multiple firms (e.g. selling securities products
  for a brokerage firm)
• It is not uncommon for brokerage firms to set up
  shop in banks looks arent everything!

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N is for Number of Clients

• Ask the planner how many clients he has, and
  whether he only services high-
• income clients
• Beware if his only experience is managing his own
  securities portfolio

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O is For One Size Fits All Plans

• Ask to see a sample of financial plans
• the financial planner has prepared
• Beware if the plans look the same
• or recommend the same product(s)

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P is For Personal Attention

• Ask the planner whether she (or an
• assistant) will be working with you
• If youll be working with an assistant, do the
  same background check and homework on the
  assistant that youd do on the financial planner

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Q is for Question

• Ask the planner as many questions
• as you want after all, hell be working
• for YOU

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R is for Risk Assessment

• Before you meet with the planner,
• think about how much investment risk
• you are able to bear

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S is for Schooling (and Services)

• Did the planner graduate from the Wharton School
  of Business or the
• local academy of hair design?
• Nail down the planner on precisely what services
  he will provide

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T is for Take Your Time

• You dont have to follow the planners
  recommendations right away
• If the planner pressures you to buy
• a particular product, be wary.

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U is for Understand the Strategies

• Beware of the Einstein Effect the planner
  telling you that the investment strategy is so
  complicated, only he understands it

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V is for Variety

• Interview several planners before
• deciding on one

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W is for Writing (Get it in)

• Ask for a copy of the advisers
• brochure and read it beforehand
• Review the advisory contract before
• you sign it

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X is for X Marks the Spot

• Dont give the adviser discretion
• the ability to trade securities for you
• without your permission without
• granting that authority in writingand
  thinking it through

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Y is for You Are in Control

• Make the Adviser
• WORK
• For Your Business

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Z is for Zero In on Your Finances

• Familiarize yourself with your financial
• plan
• Read your account statements carefully
• Keep up-to-speed on finance byreading newspapers
  and periodicals

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Connecticut Department of Banking

• Securities and Business Investments Division
• 860-240-8230
• Toll-free 1-800-831-7225
• www.ct.gov/dob