Just Ask “Do You Have A License?”

After a recent presentation to AARP for their Ready for Retirement series, an attendee asked how to find a quality financial advisor. This is a great question that is unfortunately difficult to answer. Why? Because certain parts of the financial community have spent a lot of money lobbying Congress to keep it that way.

If you frequent this blog, you know that I believe:

  1. Your financial advisor should be fee-only; no other compensation structure is acceptable. This eliminates a lot of the conflicts of interest that exist in the world of financial product sales.
  2. Your financial advisor should always be a fiduciary, which means they will always make recommendations and act in your best interest.
  3. You should always ask a lot of questions when interviewing a financial advisor. You need to know a lot about the advisor before turning over your life savings to them.
  4. You should do a background check on the advisor. FINRA & the SEC have made this process much easier in recent years.

All of these recommendations take a lot of time and energy. What if you just want to find out really quickly if it’s worth digging further? Just ask “Do you have a license?”

What is a license?

All salesmen must be licensed by FINRA to sell financial products, such as mutual funds and annuities. There are different licenses to sell different products, and all are labeled “Series” such as the Series 3, Series 6, & Series 7. These licenses means the holders can transact (sell) financial products. Why is this a bad thing? Because when selling a product, the holder of a license doesn’t have to act in their client’s best interest – they are free to act in their own best interest. I know this sounds absurd, but it’s true.

What about the Series 65?

If you do a FINRA check on me, you will find that I hold the Series 65, which is sort of the odd man out when it comes to licensing. It is the one in the series that allows the holder to give investment advice, but doesn’t authorize the holder to sell any products. It is required in almost every State, so every fee-only advisor you talk to will either have it, or will have exempted it.

Look out for salesmen wearing an advisors hat

Unfortunately, some salesmen are allowed to be both salesmen and advisors for the same client – we call them dual-registered (Some call them double dippers – I typically call them crooks, but I know that isn’t nice).This means that when they are giving you advice, they are acting in your best interest, but when selling you the product they recommended, they act in their own best interest. This is incredibly confusing, and something several other countries have made an illegal practice. If your salesman tells you they are also an advisor, walk away… If they have a license to sell ANY product, go find someone else.

So what do you think? If you ask if your advisor has a license, I would love to hear from you! I may feature your story in an upcoming blog post (Anonymously of course).

I would like to thank Blair duQuesnay, owner of ignite Investments & Planning in New Orleans for the inspiration for this blog post. You can find her on Twitter at @BlairHduQuesna.

About the author

Alan Moore, CFP®, MS
Alan Moore, CFP®, MS

Alan is passionate about providing individualized financial advice to individuals and families, regardless of their net worth, income or investable assets. An educator at his core, he strives to serve as his clients’ guide, available to help with the sometimes stressful or exciting financial situations that life inevitably brings.

Alan is the founder of Serenity Financial Consulting, which he started after noticing the lack of hourly, as-needed financial planning advice available to consumers. With experience working in several nationally recognized firms including Kahler Financial Group and Financial Service Group, Alan combines his industry experience and technical knowledge with his entrepreneurial spirit and penchant for teaching others to create a refreshing style of truly personal financial planning.

Alan is a Certified Financial Planner™ professional and Certified Retirement Counselor™. He earned his bachelor’s degrees in Family Financial Planning and Consumer Economics and his Master’s Degree in Family Financial Planning from the University of Georgia. Driven by his desire to educate, Alan also taught undergraduate financial planning courses while in graduate school.

Alan prides himself on being active in his community and feels privileged to have served in the Georgia National Guard for four years before receiving an honorable discharge. Originally from Georgia, Alan now lives in Shorewood with his wife Melissa, and enjoys taking advantage of the abundance of activities that Milwaukee has to offer.

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