Someone offers to manage your savings. They are pleasant, they have an office, and their card says wealth adviser. The checks that tell you whether they are licensed take about ten minutes and cost nothing. Here is what to ask, where to look, and how to read what you find.
The Asymmetry That Makes Asking Worth It
The checking is cheap and the mistake is not. Money handed to the wrong person is usually gone for good. There is no chargeback on a wire you authorized. The safety nets that do exist, such as SIPC when a brokerage firm fails, only reach customers of registered firms. One more reason to check the license first.
Asking a friendly professional how they get paid feels like an accusation, so people lean on the office and the referral instead. Ask anyway. The one who gets annoyed has just told you something useful. Other articles here cover how a fraud is built; this one is about verification.
Ask How They Get Paid
This is the single most useful question, and it has four common answers.
A percentage of the money they manage is the most common arrangement, and the rate usually falls as the account gets bigger. That fee grows when your account grows. It also quietly discourages advice that takes money out of the account, such as paying off a mortgage.
A flat or hourly fee pays for time. Nothing about the recommendation changes what they earn.
Commission means the company whose product you buy pays them. The payment arrives when you buy. Two funds can do nearly the same job while one pays the seller three times as much.
Many advisers use a combination. Watch the wording. Fee-only means client payments are the firm's only revenue. Fee-based means a fee plus commissions.
Ask for the total in dollars for one year, not in percentages. A one percent fee on a $200,000 account is $2,000 a year, before fund costs.
Whose Interest the Advice Has to Serve
A fiduciary duty means the person must put your interest ahead of their own. In the US, registered investment advisers owe that duty across the whole relationship, covering both care and loyalty. Conflicts must be removed, or disclosed fully and plainly enough that you can agree to them knowing what they are.
Brokers work under a different rule. A broker's recommendation of a security or a strategy to a retail customer has to be in your best interest. The broker cannot put their own interests first. That duty attaches to the recommendation. It creates no ongoing obligation to watch your account unless you have agreed to one.
Suitability is an older standard you may still hear about. It asks whether a recommendation fits your age, finances, and goals, which is a lower bar than best. It does not apply where Regulation Best Interest applies, which covers a broker's securities recommendation to you. What is left to suitability is advice given to institutions, and products that are not securities, such as fixed annuities and life insurance. Those sit under state insurance law, and most states have moved them to a best interest standard too.
The card tells you none of this. Financial adviser, wealth manager, and retirement specialist are marketing terms, not licenses. The same person can act as an adviser on one account and a salesperson on another. So ask: are you a fiduciary on every account I hold with you, and will you put that in writing?
Two Public Registers, and What Each One Covers
The US keeps two free databases, and they cover different people.
BrokerCheck, run by FINRA, covers brokers and brokerage firms: the people and companies that sell securities and execute trades. It carries investment advisers too, firms and individuals. That half of the record is only a summary, with a link across to the full version. Follow the link. A thin entry means you are on the short form, not that the record is clean.
The Investment Adviser Public Disclosure site, run by the SEC, holds the full version. It covers advisory firms and their representatives, including smaller firms that register with a state rather than federally. Both databases are free and need no account, and Investor.gov has one search box that queries both.
Search the person and the firm separately, because a clean firm can employ someone with a long record. Then check your state securities regulator, which licenses smaller advisory firms and holds complaints that never reached the federal level.
If nothing comes up anywhere, that is your finding. Anyone managing your money should appear somewhere.
Reading a Disclosure Without Panicking
A record may list disclosure events. A disclosure is any reportable item: a customer dispute, a regulatory action, a criminal charge, a firing after allegations, or a bankruptcy or unpaid tax lien.
A disclosure is not a conviction. Some are pending, some were denied, some were withdrawn. One denied complaint from fifteen years ago about a fund that fell in a crash is close to noise.
Read for pattern instead. How many events, how recent, and do they repeat the same allegation? Unauthorized trading or misrepresentation appearing twice is a different signal from one old dispute. An action brought by a regulator carries more weight than a customer complaint. Also count the firms: five employers in six years, with a termination among them, is worth asking about.
Then ask the person to explain what you found. Comparing their version with the record is itself a test.
Who Actually Holds the Money
A custodian is the firm that holds your securities and cash in an account in your name. Your adviser can be authorized to trade that account while never being able to move money to themselves. That split is one of the strongest protections a small investor has. If the check is made out to the adviser's own company, they control both the assets and the record of them.
Bernard Madoff's firm was its own custodian and produced its own account statements, so nobody outside it could confirm the securities existed. The mechanics are covered elsewhere here.
So ask for the custodian's name, and look it up yourself.
The Documents Worth Reading
Advisory firms in the US file a disclosure brochure, Form ADV Part 2A, free to read on the adviser registration site. It sets out services, fees, other compensation the firm receives, conflicts of interest, disciplinary history, and who holds client assets.
Part 2A describes the firm. Part 2B, the brochure supplement, describes the person advising you: education, work history, disciplinary record, outside business activities, and who supervises them. Ask for it by name.
Firms registered with the SEC also give retail clients Form CRS, a short relationship summary covering fees, conflicts, standard of conduct, and disciplinary history. Smaller firms that register with a state do not file one, so its absence tells you nothing.
Your statements should arrive from the custodian, addressed to you, at least quarterly. Compare the adviser's performance report against that statement every time. A report on the adviser's letterhead, or a portal only their office controls, proves nothing about what you own.
When the Answer Is a Dodge
Three answers should end the conversation on their own. Vagueness about compensation is the first, especially the line that it costs you nothing. Somebody is paying, and you are entitled to know who. Pressure to decide today is the second, since no legitimate investment expires this afternoon. An offer to hold your money personally is the third and worst, because it removes the custodian.
None of the three proves fraud. They do not have to. The cost of walking away from an honest adviser is a mildly awkward afternoon.
