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ISO: An Adviser To Trust

To check the background of a larger firm, go to http://www.sec.gov/ and click on "Check Out Brokers & Advisers" under Investor Information to be directed to a firm's "Form ADV." The two-part form contains information about whether the firm has had trouble with regulators or clients, among other things. That form is available now only for advisory firms. To get individuals' forms, investors must ask the investment adviser.

To check smaller firms, investors should go to the Web site of the North American Securities Administrators Association, at http://www.nasaa.org/ , to find their state's securities regulator.

On all background checks, be sure to look for a broker or adviser's employment history. Several job changes in a short time is not a good sign.

Many regulators say a good place to begin is to ask a relative for a recommendation or attend one of the free seminars offered at many community colleges.

An unavoidable part of the process is a face-to-face interview in which investors ask questions that make some people uncomfortable. The big one: How do you get paid?

"As a culture, we don't often talk about how people are paid," says Susan Wyderko, director of the SEC's office of investor education. "You have to."

The reason is that many, if not most, financial advisers are paid commissions by mutual fund and financial services companies. Often, investors aren't told of cheaper, sometimes better, alternatives. To find a planner who is paid only by a flat fee and can offer conflict-free advice, go to the Web site of the National Association of Personal Financial Advisors, http://www.napfa.org/ .

For extra comfort, some investors look for advisers accredited by one of a number of companies that test planners and make them follow stricter ethical rules. A major group is the Certified Financial Planning Board of Standards Inc., a Denver-based company that has issued a CFP designation to 48,000 planners.

Of course, investors face risks even if they think they're being careful.

When she was thinking of retiring a few years ago, Donna Widmer, a 59-year-old computer programmer for Hallmark Cards Inc., handed her retirement savings of $400,000 to Randall Hallier, a financial adviser she had heard give an investment seminar at the local library in Roeland Park, Kan.

Hallier is the owner of Retirement Plus Inc., of Overland Park, Kan., a registered investment advisory firm that has had no problems with regulators, according to its Form ADV.

According to a complaint filed in federal court in Kansas City, Hallier put the money in an expensive annuity that Widmer didn't need: Its main feature was a death benefit, and Widmer has no beneficiaries. The complaint also alleged the annuity was made up of "aggressive" mutual funds concentrated in telecom and tech sectors, despite the fact that Widmer was an unsophisticated investor seeking "a conservative return in order to meet her living needs."

The suit alleged damages of $150,000.

Hallier's attorney, Michael E. Waldeck, argued that the investments were suitable.

After deliberating about eight hours, a jury came back with a verdict: Widmer lost.

Waldeck said many lawsuits are brought by disappointed investors who simply don't "fully understand the risks of the marketplace."

Jeffrey S. Kruske, a lawyer for Widmer, said the verdict was "shocking to us." He added: "They didn't recommend any alternatives, just annuities. There's no reason why she needed all that stuff."

He said they had not decided on an appeal.


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