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Shopping for Sound Investment Advice

When it comes to investing, maybe you don't want to go it alone. Some people are too busy; some aren't well enough informed; some feel more comfortable getting a second opinion.

A huge "help" industry awaits, made up mostly of stockbrokers and financial planners. There's no magic formula for finding a good one, but there are ways to look.

First, don't move your money anywhere until you know something about investments yourself. This industry encompasses honest advisers and slimy ones. If you're a total innocent, you risk falling into the wrong hands.

So do nothing until you read a couple of basic books about personal investing. Set down your investment objectives -- what you want the money for, when you'll want it and your feeling about risk. Then start your hunt for a professional.

Recommendations always help but they are not enough. "You need to do some comparison shopping," said Les Silverstone, a retired broker in Bethesda and founder of an ethical-practices organization called Stop Looking the Other Way (SLOW). Many firms (or rogue managers at firms) push their brokers to sell high-profit products, even if they're not the best investments for you. You want a broker who puts the customer's interests first. A plan of attack:

· Think about what you want your adviser to do. Are you only after investment suggestions, including individual stocks? Then you need a stockbroker (they often call themselves "financial consultants" but their job is to sell securities). Best bets: a major national or regional brokerage house that deals in the stocks of well-known companies. Firms that peddle a lot of penny stocks (those selling for $5 or less) are dealing in super-risky issues.

If you're after general financial advice -- on saving, budgeting, insurance and long-term planning -- and want a portfolio of mutual funds, consider a financial planner. Anyone can claim to be a planner. So choose someone with a certified financial planner (CFP) designation.

· Look for an experienced broker or planner, not someone who recently finished training.

· Interview several advisers by phone. Ask about their professional and educational backgrounds and the kinds of clients they serve (retirees, baby boomers, government employees, business owners?). You want someone who deals with people like you. Ask for the telephone numbers of a couple of long-term clients who'd be willing to give the adviser a reference. Reject those who say they won't ask a client to talk.

Discuss your general objectives and take notes on what the adviser says. If he or she sounds woolly, lofty or impatient, or doesn't seem to be hearing you, say ta-ta forever.

· Once you've got a couple of prospects, double-check their backgrounds. Brokers don't always tell the truth. The securities industry maintains a Central Registration Depository (CRD), covering brokers and their firms. You can get the broker's employment history (be sure it agrees with what you were told, and be wary of someone who moves around a lot); a list of pending and completed disciplinary actions, complaints, settled arbitration cases, bankruptcies and liens; and information about any action taken against the firm.

For the full report, usually free, call your state's securities agency. If the number isn't in the phone book, you can get it from the North American Securities Administrators Association (202-737-0900). The National Association of Securities Dealers (800-289-9999), an industry self-regulatory body, also sends out three CRD reports but won't disclose any pending complaints.

For similar information about planners who give investment advice, ask them for a copy of the ADV form they're required to file with the Securities and Exchange Commission.

· Set up interviews with the brokers or planners who pass. Expect them to question you closely -- about your personal finances, your feelings about risk and what you hope to achieve. (Reject an adviser who doesn't.) Discuss how the adviser is paid and the costs of various investments. Think about how well and how patiently your questions are answered.

Prepare a written summary of your objectives, for you and the broker to sign. That helps keep both of you on track.