Saving & Investing - Head Matters

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7. How to Invest

d. Selecting a Financial Professional

First, choose a type of professional based on the services they offer. There are several types of financial professionals:

Financial Planners—A financial planner uses the financial planning process to help you figure out how to meet your life goals. The planner can take a “big picture” view of your financial situation and make financial planning and investment recommendations that are right for you. The big picture approach sets the planner apart from other financial advisers who may be focusing only on one aspect of your financial life. Many planners have earned the Certified Financial Planner® (CFP) certification or the Chartered Financial Consultant (ChFC) or Personal Financial Specialist (CPA/PFS) designations. This means that they have passed certain tests to show that they are knowledgeable in their fields. 

Investment Advisors
—A person who is paid to provide securities (stocks, mutual funds and bonds) advice must register as an investment advisor with the Securities and Exchange Commission or relevant state securities agencies, depending upon the amount of money he or she manages. Because financial planners often advise people on securities, many are registered as investment advisors. Many investment advisors are fee-only. This means that they get all of their income from providing investment advice rather than selling investment products. Investment advisors cannot sell securities. For that, you must use a licensed securities representative such as a stockbroker.

Stockbroker
—Also called registered representatives or registered reps, stockbrokers are licensed by the state in which they practice. They buy and sell products such as stocks, bonds and mutual funds.  Stockbrokers are salespeople and they earn commissions on all of their transactions. Commissions are only one of the many types of transaction costs. Other costs include account setup, processing and transfer fees. Before investing, you should ask the stockbroker about all of the fees.

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