Financial Advisors: directory of firms

An investment adviser, under the SEC's description, is a firm or person that for compensation is in the business of advising others about securities or issuing reports about them. Advice is ongoing, the account is monitored, and the fee is usually a percentage of the assets held with the adviser. The obligation runs to the whole relationship, not just to individual trades.

A broker buys and sells securities on your behalf, may make recommendations, and may agree to monitor some accounts. The duty attaches to the recommendation. Regulation Best Interest requires a broker-dealer to act in the retail customer's best interest at the time a recommendation is made, without placing its own financial or other interest ahead of the customer's, supported by four obligations: disclosure, care, conflict of interest and compliance.

Start at Investor.gov, which searches both systems, or go straight to Investment Adviser Public Disclosure for advisers and BrokerCheck for brokers. Look for registration status, where the person is registered, the employment history and any disclosure events. A gap in employment or a chain of short stints at several firms is worth asking about even when nothing is formally reported.

Then read Form ADV Part 2 rather than skimming it. Item by item it tells you what the firm charges and how, whether it earns anything beyond your fee, who else pays it, how it handles brokerage and referrals, and what it has been disciplined for. Your state securities regulator may hold additional information, and the SEC suggests checking with them too.

An advisory fee is usually a percentage of assets, billed quarterly. A brokerage relationship charges a commission or markup on each transaction. The SEC is blunt that neither is charity: if someone is working for you, they are being paid, and you should always feel free to ask how much. When a fee is quoted as a percentage, ask what that is in actual money this year.

Underneath that sit costs that do not appear on the invoice: expense ratios inside the funds you hold, platform and custody charges, trading costs, and in some products ongoing distribution fees. Add them up. An advisory fee that looks modest can double in effect once the underlying fund costs are counted, and that total is what compounds against your return.

The Securities Investor Protection Corporation may protect you if a brokerage firm fails or if your securities are stolen. The SEC recommends checking that your brokerage firm carries that coverage. It is a meaningful backstop against a firm collapsing with your assets on its books.

It is not insurance against losing money. SIPC does not protect you against declines in your investment holdings, and no registration, certification or disclosure form changes the fact that markets fall. Anyone presenting a securities investment as guaranteed, protected or risk-free is describing something that does not exist.