10 Things to Consider before Selecting a Financial Advisor – By George Mentz, Esq.

1. Experience – Make sure your advisor has a      track record of success.
2. Accredited      Education (Level 2) Preferred      – Make sure your advisor has an education from a program that is      accredited.  Also, if the advisor  has a degree or diploma from a Level 2 institution that has both regional  accreditation and business accreditation, that is the best. As your advisor if he or she has successfully completed all exams of a business degree from an ACBSP or AACSB accredited program.
3. Licenses – Are they licensed with the SEC  or FINRA and do they have a record of good standing.
4. Government Professional License – Are they a lawyer or CPA.  If so, check      with the state bar association or AICPA to make sure they have a solid  record.
5. Regulatory and      Product Knowledge      – Make sure your advisor has the ability to recommend a broad array of      solutions for your wealth preservation and growth.
6. Qualifications – See if your advisor is a      member of a prestigious body such as the  CWM ® Chartered Wealth Manager Institute.  Ask if they are board certified as      an:  Accredited Financial Analyst ® or  Chartered Wealth Manger ®.   Also,      if they have a law degree and license or CPA, then they may also be  competent to provide advice on tax law and estate planning.
7. Value and      Compensation -  How will your advisor earn income from you?  Make sure they get paid for their work,      but it may be best to make sure they are not double dipping.  Some advisors will charge a fee for      advice and then also invest you in a product that also has fees.    With the ease of use of ETF Exchange  Traded Funds, make sure your advisor is providing added value.
8. Wealth Team  - Does the wealth manager have a group or      team to help you in the areas of:  Investing, Wealth Preservation, Risk and Insurance, Trusts,  Legal,  Retirement and Tax. Ask if      they have names of people they have worked with successfully.
9. Customer   Regulations – Be      sure to let your advisor know what your objectives are. Make sure they  understand your 1) suitability, 2) risk tolerance, and 3) time  horizon.  Ask the wealth      manager  to explain each of these to  you in detail.
10. Policy Statement – Make sure your wealth manager  provides you with an IPS Investment Policy Statement that outlines what  they will do for you and the limitations involved.

*No investment, legal or tax advice is intended to be given herein. Please see a licensed professional before making any important decision.

Standards for Professional Designations and Board Certifications in the United States

Certification Standards  Guide

Professional Designations in the United States and Internationally have a long history.  Legal cases such as the IBANEZ decision of the Supreme Court imply  that bone fide “board certifications” or “professional designation”  criteria includes:  1) Accredited Education, 2) Assessment, 3) Degree  4) Continuing Education and 5) Ethics/Professionalism 6) Experience.

Types of Certifications  and Accreditation Standards – Level II is the Highest

1. Certification      requiring Level 2 Accredited education and exams.       This is the highest form of educational requirements.  This education is generally preferred      for CPA licensure  and for      certifications from organizations such as the AAFM American Academy of      Financial Management.  Level 2 means  that both the college or university is accredited AND the business school      is also separately accredited by a government recognized body.  The ACBSP, AACSB or EQUIS are examples  of level 2 accreditation while education      from an ABA American Bar Association education would also be level 2.
2. Charters or Certification      requiring a college diploma and exams.  This is a  high standard but does not require Level 2 Accreditation Degree.  Thus, the degree may be from a good      school offshore but it may not be accredited by a recognized  organization.  Certifications in      this category focus on giving only exams as a path to achieving a “non      government recognized professional designation” or becoming chartered  with a credential as a financial analyst.
3. Credential requiring      only exam.  This standard is strong but does not  require a degree historically but rather a test only.  Examples are a project management      designation or a typical financial planner designation or credential.

• Note:  A degree, MBA, MSc, or credential based on a Level 2 education is more widely accepted globally than qualifications or degrees that do not maintain  ”Level 2″ Status.  Further, course credits are more easily transferrable with reciprocity from Level 2 business schools and institutions that are double accredited.

*Most State and Sovereign Governments worldwide prefer Level II Accreditation for the purposes of business school standards, top MBA programs, or becoming a CPA or Chartered Accountant. Further, Government recognized Bar Accredited Education is required for a legal education and  licenses.  Level 2 accreditation – the business school. In a Level 2 accreditation, the college or university and the business school are separately accredited, but the accounting program is not separately accredited. This level applies to a business school that is accredited by an organization recognized by the Council of Higher Education Accreditation (CHEA) as a specialized or professional accrediting organization, such as the AACSB or the Association of Collegiate Business Schools and Programs (ACBSP).

Why is this Topic Important to Wealth Managers? This topic discusses the new regulatory agency that will have an effect on most life insurance companies doing business in New York.  Because the new regulatory agency will oversee insurance and banking, it is likely that changes in the insurance compliance law are just around the corner.  After the financial crisis of 2008, it appears New York is taking action to prevent future disruptions in the market.  Wealth managers should be aware of the new agency as changes to insurance regulation and compliance are sure to result from the creation of this organization.

New York State is in the process of creating a new Department of Financial Regulation (DFR) which is designed to harnesses the regulatory powers and expertise of the Banking and Insurance Departments, as well as the Consumer Protection Board, by combining the functions of each, to make the State’s oversight of financial services responsive to the 21st century needs of the industry and its consumers.

This new State agency, created pursuant to legislation submitted as part of the 2011-2012 State Executive Budget, consolidates the functions, operations and staff of the Banking and Insurance Departments, along with related segments of the Consumer Protection Board, into a single State agency.

Consolidation of these agencies and activities within a single agency platform is intended to afford the State the ability to unify the State’s regulation of financial services and to more rapidly and capably respond to changing market practices and consumer preferences, thereby ensuring the industry’s continued integrity while shielding consumers from abuses.

In addition to enhancing and refining the State’s regulatory oversight of the industry, the consolidation will provide the State with the opportunity to reduce overall spending with the use of shared services.

The Superintendent of the Department of Financial Regulation will be appointed by the Governor, with the consent of the Senate. The Department’s main offices will be located in Albany and New York City.

The Department’s main responsibilities will be carried out through two major programs: regulation and consumer protection.

Regulation

To ensure the safety and soundness of all regulated entities, the Department will monitor banks, insurance companies and other financial institutions to identify problems and will work with management to promptly solve them.  The Department will carry out this responsibility through annual on-site examinations, regular review of institutional financial reports, and periodic site visits.

Consumer Protection

To ensure that State-chartered banking institutions are complying with State laws and regulations and that no individuals are unfairly denied credit, Department employees will conduct consumer compliance examinations and resolve consumer complaints.  Staff will monitor whether institutions are helping to meet the credit and banking needs of local communities as required by various State laws.

The Department will strive for the fair treatment of insurance policyholders, claimants and the public through the regulation of company claim payments and sales practices, responses to consumer complaints, and the timely review of insurance company denials of coverage.  The Department hopes to promote high standards of industry conduct and competence through testing, oversight, and pre-licensing and enforcing educational standards of licensees.

Furthermore, the Department will proactively educate consumers regarding unscrupulous financial industry practices and products and will advocate on behalf of consumers who have been defrauded or harmed by such abuse.

The State Executive Budget recommends just over a half of a billion dollars in Special Revenue Funds for the Department of Financial Regulation for fiscal year 2011-2012. The Department of Financial Regulation’s operations will be primarily funded through assessments charged to regulated insurance and banking institutions and organizations. The remainder of the Department’s operating budget will be derived from various fees, such as those paid by entities applying for licensure or charter.

Next week’s blogticle will discuss new and exciting planning aspects of 2011.

We invite your opinions and comments by posting them below, or by calling the Panel of Experts

NB: This work or parts thereof originated from previous official Government publication available to the public.