Rope one in

Entrepreneur, Dec, 1997 by Lorayne Fiorillo

Wasn't it Will Rogers who once said "I never met a financial advisor I didn't like"? No matter how likable your financial planner, there's more to a successful long-term relationship with a financial advisor than a few trades and a witty repartee. Financial magazines are filled with stories of gun-slinging, fast-talking hombres, making it sound as if there are more outlaws on Wall Street than there were in the wild, wild West. But don't worry, partner: Not every financial consultant learned the trade from Billy the Kid.

Elisse Walter, CEO and executive vice president of legal and regulatory policy for NASD (National Association of Securities Dealers) Regulation Inc., contends, "A good industry is getting tarred by the conduct of a few bad apples." The majority of financial advisors value their clients and strive to help them reach their financial goals. The trick is learning to separate the wheat from the chaff. Surprisingly, it's a lot easier than learning how to rope a cow or break a bronco. It just takes a little, well, horse sense.

* COLD-CALL COWBOYS

There's nothing like sitting 'round the campfire . . . listening to the chirp of a chorus of cold calls from every brokerage firm in the country. Some callers have great ideas, respect your time and send appropriate information. If you're not interested, most interlopers won't call back. But what if they do? Short of telling them you just emerged from bankruptcy court or that your spouse is a broker, Walter recommends that if you're not interested, you tell the caller to put your name on his or her firm's "don't call" list.

If calls from that firm continue, you can take action in the form of sanctions against the offending broker and his or her firm. And speaking of being taken, no one is forcing you to buy their ideas at gunpoint. Don't let fear or greed get the best of you. Another bonanza will come along, pilgrim.

* WHO WAS THAT MASKED MAN?

Certified Financial Planner, stockbroker, registered representative, Chartered Financial Consultant - it's enough to make your eyes glaze over. Understanding what these tides mean can help. According to the Certified Financial Planner Board of Standards Inc., a personal financial planner "uses the financial planning process to help a client determine whether he or she can meet life's goals by addressing a host of interrelated issues like budgeting and saving, tax-planning, investments, and insurance, or by focusing on a single or limited number of financial concerns."

Financial planning is a process, not a product. The term "financial advisor" covers a spectrum of financial professionals:

* A Chartered Financial Consultant (ChFC) earns this designation by completing a program covering economics, insurance, taxation and real estate. These professionals are usually involved with insurance sales.

* Registered representatives, or stockbrokers, have passed an NASD-administered licensing exam and are affiliated with a stock exchange member broker/dealer firm. Their expertise includes stock, bond and mutual fund transactions, and they usually receive commissions.

* A Certified Financial Planner (CFP) has fulfilled certification and biannual licensing requirements. He or she often compiles complete financial plans and is compensated by fees, commissions or both.

Just because a broker has passed the licensing exam doesn't mean he or she is the right one for you, however. The NASD publishes a free booklet, Invest Wisely (available by calling 301-590-6500), that offers tips on choosing a broker. Before talking with any professionals, the publication recommends preparing a financial profile that includes your financial goals; risk tolerance; time frame; past investment history; assets, debits and income; and the amount you intend to invest. Be prepared to talk to potential advisors at several firms and learn about their investment and professional experience.

Ruthann G. Niosi, a former assistant U.S. attorney and ex-Securities and Exchange Commission enforcement attorney who now heads her own law firm in New York City, suggests investors use all the materials at hand to check an advisor's credentials, including brochures on the broker's firm, information from the NASD and referrals from friends. But don't rely on the herd mentality. "Ask advisors to profile their type of trading and investment strategy before you tell them what you want," says Niosi. "Make sure your broker's strategy is consistent with the level of risk you're comfortable with."

Track records are often used to persuade investors to sign up. While past performance is no indication of future returns, it can be nonetheless helpful. If you're conservative, make sure the record you're being shown is equally conservative. Niosi recommends meeting with a potential advisor in his or her office, not in your home. "This is especially important if you've never heard of the firm," Niosi says. "If it's a boiler room operation, you need to know that going in." If anything makes you feel uncomfortable, take your money and head for the hills.