'Is my financial adviser the next Madoff?'

By Walter Updegrave, senior editor


(Money Magazine) -- A family friend who is a financial planner wants to help me with retirement planning. How can I verify his credentials? -- S.M., Reston, Virginia

If you're thinking of going to a financial planner or other adviser for help with your retirement planning -- or for any other reason -- you want to be sure the person truly has the expertise to guide you.

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But given the possibility of getting duped by an outright crook like Bernie Madoff or being targeted by a glorified sales person posing as an adviser, you also want to confirm that you can trust the person you're hiring, and that you won't end up paying out outrageous fees.

That can be a tall order. But a new service, BrightScope Advisor Pages, has the potential to make the process of choosing and vetting financial planners, brokers and other advisers a lot easier.

As its name suggests, BrightScope Advisor Pages is run by the same people, twin brothers Mike and Ryan Alfred, who co-founded BrightScope, the website that rates 401(k)s and helps participants assess their plan.

Advisor Pages applies the same idea to financial planners, brokers and investment advisers.

Instead of you having to hunt down information about an adviser's credentials, work history, experience with regulators, etc., Advisor Pages culls this data primarily from the Securities and Exchange Commission and FINRA (Financial Industry Regulatory Authority) and turns it into a searchable online database.

So, for example, if you want to take a closer look at this family friend who's so eager to oversee your retirement planning, you can plug his name into the Advisor Pages search box.

And if this person is among the nearly 450,000 people and companies the service currently covers, you'll get a page that shows, among other things, the name of the firm this person works for, the average account size, what types of clients the firm handles, this person's work experience, professional designations and registrations and whether this person has had disputes with the SEC or FINRA. You can also search by the name of the adviser's firm.

Now for some caveats. This service has just launched, so it has some significant limitations for now at least. Lots of advisers aren't yet covered, although Mike Alfred told me he expects to have some 600,000 advisers and firms in the database within the next few months.

He estimates that should take care of 90%-plus of the advisers out there. BrightScope also plans to begin adding insurance agents within a few months. I'd also note that, based on my test runs of the site, some of the material is rather sketchy at this point.

A big shortcoming: no fee info. Mike Alfred says that's coming, but the challenge is scraping it from the ADV (adviser) forms that advisers file with the SEC and state securities regulators. So why am I mentioning this service given that it's still in an embryonic stage?

Well, if BrightScope's record on the 401(k) front is any indication, I expect that both the quantity and quality of the info available at Advisor Pages will grow pretty quickly. Which means it has the potential to become increasingly useful to consumers looking to find or vet advisers.

That's especially likely to be the case as more people go to this site (or competing sites that may arise) looking for information and as advisers, eager not to cede ground to competitors, also weigh in.

For example, Advisor Pages gives advisers the option or providing more details about themselves and the services they offer. One enhancement that I think holds particular promise is a planned feature that will allow an adviser's current or former clients to post comments on that adviser's page.

That sort of informed feedback, positive or negative, can be invaluable for someone checking out an adviser. In the meantime, though, while I think Advisor Pages is worth a visit, you'll still want to consult other sources to size up an adviser.

For example, to verify whether or not a financial planner has met the criteria for the CFP designation and still holds it, you can plug his or her name into this search tool.

You'll also want to check with federal, state and industry regulators to see whether the adviser has a history of complaints or problems with clients or regulatory agencies. And as important as the expertise, experience and integrity of the adviser are, you also want to make sure an adviser is the right match for you.

That involves interviewing a few to make sure you're compatible with them and the way they work. As I've noted before, that also means thinking about what type of help you really need.

Do want an overall financial plan? Help structuring your portfolio? Advice on getting retirement income from your savings? Are you looking for an ongoing relationship, or help with a specific issue? And let's not forget the issue of how much and how (fee only? fees and commissions? flat fee or by the hour?) you want to pay.

For more on these and other issues, you can check out the Getting Help section of our Ultimate Guide to Retirement. One last thing: There are a lot of what I would call gimmicky or just plain junk credentials out there, especially when it comes to retirement planning.

So as I explained in a previous column, you don't want to be overly impressed by a string of initials on a business card or letterhead.

So family friend or no, you definitely want to do some checking before signing on with this planner. The new service I mentioned may make this process a little easier, if not today, then hopefully in the future.

But however much time the vetting takes, better to put in the effort now than sign up without doing so, and later regret it. To top of page

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