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5 Essential Ground Rules To Help you Avoid the Worst Financial Advisors in Your Small Town

Insights Investments

There are so many benefits to living in a small town; less crime, less congestion, and lower costs of living to name a few. Based on a 2018 Gallup poll, about 31% of Americans are choosing to live in small towns or rural areas, and another 9 % of Americans wish they could. They love the small town feel and close-knit relationships. I myself live in a small town with a population of a little under 14,000 and enjoy some of the benefits listed above.

Small towns are great, though there are trade-offs. With fewer citizens, small communities also have to wrestle with fewer opportunities for local jobs, fewer community resources, and fewer service sector businesses like lawyers, doctors, and insurance agents. Because of a smaller population size, finding a good financial advisor in a small town can be also be difficult.

Basic Ground Rules

Not just any financial advisor will do. Just because they are in your town, doesn’t mean they are right for you. You don’t want a crook, you don’t want a salesman, and you certainly don’t want to settle for the first name you find. Here are some basic ground rules that can help you sniff out the bad eggs.

Filter Through Broker Check and SEC

First, go to brokercheck.finra.org and punch in your potential advisor’s name. You can search by last name, firm name, and location to find the advisor. Broker Check will list years of service and firms where the advisor worked, but most importantly, it will list any disciplinary actions against the advisor. You can read the description of the disciplinary action and decide if that advisor is worth avoiding. If you can’t find the advisor on brokercheck.org, they will be listed on adviserinfo.sec.gov. You’ll find similar information as to what is listed on Broker Check. If they are not on either site, run the other way fast! They have not met the minimum requirements to offer investment services and have no business touching your money.

Make Sure They Are Actually Financial Advisors

Second, make sure they are actually financial advisors. This is different than going to Broker Check or Advisor Info to see if they are licensed to deal with investments. The term “Financial Advisor” is generic and can be used by just about anyone in the investment industry. Investment brokers, insurance agents, bank financial representatives can all use the “financial advisor” pseudonym, even if their primary purpose is to sell you investment products. Just because they have “Financial Advisor” on their business card, doesn’t mean they are qualified to offer comprehensive financial advice. If they are not advertising that they can providing comprehensive financial advice in your best interest – they are probably just selling investment products or insurance to meet a sales quota.

Don’t Trust Just Anyone

Third, don’t trust just anyone for a blind referral. Don’t trust your dad, you’re mom, your cousin, your best friend, your uncle, your sister-in-law...(you get the picture). I know that family and relationships are everything in small communities, but you’re reading this article because you want to know who to avoid. Not everyone is going to go through the same hard work as you. If you land on the same advisor as someone you know, that’s great! You both have found a winner! Once you’ve found that trusted advisor, you can help people in your community who are searching for a better investment experience.

Interview More Than One

Fourth, you’re going to have to interview more than one advisor…preferably three.  When you buy a vehicle, you shop around for the best one you can find. Why? Because you don’t want to get stuck with a lemon. Likewise, you want to shop around to find the best advisor for your money so you’re not stuck with a real stinker. It takes time and effort to transfer your funds from one advisor to another, so you want to get it right the first time. Find three advisors that have made it this far and interview them all about costs, investment philosophy, and qualifications. After interviewing, choose the one that is obligated to look out for your best interest and who you feel most comfortable with.

Don’t Take Remote Advisors Off of the Table

Fifth, don’t take remote advisors off the table. Because you live in a small town, you are limited. You may only have one advisor that is worth your money in your community. But with technology, you can find advisors that can serve you as well as (or maybe even better than) those that are local.  I know - buying local keeps the money in your local economy. It builds relationships with people you see every day. But listen – if you give your money to the wrong advisor, you could end up with fewer funds and your community is going to suffer because of it. On top of that, you’re enabling a bad business to go on taking your community's limited resources.

Even if you live in a small town, you have options. You want the best for your money, so go out there and find an advisor that you can trust. Follow the five basic ground rules listed above, and you will avoid the worst financial advisor out there. You can become financially confident and you can have a better investment experience.

- Tim Bacus