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Get Your Questions Answered

The Minnesota Department of Commerce has produced this helpful guide to answer your questions about Securities Agents, Financial Planners and Investment Advisers. You will learn what to ask, what to expect, and what to avoid when you receive investment advice.

  • What is a financial planner?

    BEWARE!! Anyone can call themselves a Financial Planner. Minnesota currently does not license or regulate Financial Planners. However, if a Financial Planner provides specific investment recommendations for a fee, they may be required to be registered by the Department of Commerce as an Investment Adviser. Financial Planners may also be licensed as securities and/or insurance agents. Financial Planners generally coordinate and monitor your investment concerns and they may work with specialists in various fields.

  • What is an investment adviser?

    An Investment Adviser makes specific investment recommendations based on your needs and circumstances. They may simply give you advice that you can implement on your own or they may hold your funds in an account managed by the adviser. The Investment Adviser is paid a fee for the service they provide or may charge a percentage of the market value of the securities in your portfolio. Investment Advisers are federally licensed by the Securities and Exchange Commission. In addition, the Minnesota Department of Commerce approves licenses for Investment Advisers for business conducted in the state.

  • What is a securities agent?

    A Securities Agent represents a securities broker/dealer. They make recommendations and sell various securities for which they are paid a commission. You do not "hire" a Securities Agent. The agent is required to make suitable recommendations based on your objectives and needs. The final responsibility for any securities purchase remains with the consumer. The exception is if the client gives written authority to the agent to manage their account. Securities Agents and Broker/Dealers are licensed by the National Association of Securities Dealers and licenses are approved by the Minnesota Department of Commerce.

  • How do I choose someone to help manage my money?

    Selecting a financial planner is a decision that deserves careful thought and attention. It's your right and responsibility to investigate their background, credentials, and how they operate.

    One way to obtain information about your Financial Planner is to call the Department of Commerce. If they are licensed as an Investment Adviser, insurance, real estate, or securities agent, you will be able to learn if any disciplinary action has been taken against them, their firm, and whether they are properly licensed. An industry organization, such as the Institute for Financial Planners, may provide more information.

  • What kind of credentials should I ask for from a financial adviser?

    In Minnesota, any Investment Adviser, insurance, real estate, or securities agent offering to provide you with financial planning services is required to provide you with a Financial Planning Disclosure document. It must contain the following:

    • How the adviser will be paid; commissions, fees, or both. "Commission only" advisers should offer as wide a variety of investment choices as "fee only" advisers. 

    • The name and address of companies that supply financial services or products offered by the planner. 

    • The name of the firms where the securities are held and traded. 

    • The professional licenses held by the adviser. 

    • The types of financial products (mutual funds, stocks, limited partnerships, etc.) that the adviser is authorized to sell. 

  • What questions should I ask a financial adviser?

    Before entering into an agreement or deciding to invest your money, make sure you have answers to some important questions. Call the adviser and schedule an initial consultation. Ask if they will be charging a fee for the first meeting. Then follow up with these questions:

    • Will the person you are meeting with be your adviser or will they be supervising others that will manage your account? 

    • Are the recommendations based on your individual situation? Ask to see a sample of a written plan that you will receive. 

    • Does the adviser receive a commission or have a vested interest in the products they provide? 

    • Can the plan be implemented with products and services that are not provided by the adviser? 

    • Is the adviser easy to reach and do they return phone calls promptly? 

    • How will the adviser keep you informed about your account and other information you want? 

    • How many accounts does this adviser service? 

    • How often will there be a review of your situation and how much will it cost? 

    • Has the adviser been the subject of civil litigation or regulatory action? 

    • How long and under what name have they been engaged in financial planning? 

    • Ask for client references. 

  • What services should be offered by an investment adviser?
    • A clearly written and individualized financial plan. This should include a list of your own objectives and financial needs. This should also tell you the cost to implement the plan. 
    • A discussion about risk. That is, how much are you willing to tolerate? You should understand the risks and benefits of each investment option and know what the "worst case" would be for each. 
    • Specific suggestions for improving your personal cash management. 
    • An explanation for the basis of your plan. This should include potential changes in interest rates and inflation. 
    • A range of investment options with the pros and cons for each. You should have several alternatives. 
    • Additional advice, if needed, from other professionals. This might include lawyers, accountants or stockbrokers. 
    • A discussion of how the recommendations are suited to you. They should address your goals and objectives. You should also know the liquidity and risk involved and if the recommendations provide you with enough diversification. 
    • A specific schedule for monitoring your plan. You have a reasonable expectation to receive regular written and verbal updates. You should also have written documentation of where your money is invested. 
  • How can I avoid abuses in financial planning?

    The best defense against abuse in financial planning is knowledge. Consumers who most often become victims say they came to an adviser with no understanding of investing or financial matters. They were unaware there was a problem until it was too late. Here are some things you can do:

    • Make sure the adviser understands your financial needs, your tolerance for risk, and your goals. Don't enter into an agreement with an adviser without this information. The agreement should be in writing, signed by you and the adviser. If you believe the recommendations you receive are inappropriate, get a second opinion. 

    • Inform your adviser of any changes in your financial picture as soon as possible. 

    • Read your statements carefully. If there is something you don't understand call your adviser. 

    • If there appears to be a problem with your adviser or securities agent, contact the compliance officer or branch manager of the company where they are employed. Follow your phone call with a letter and keep a copy for your records. If they can not or will not address your concerns, call the Minnesota Department of Commerce or the Securities and Exchange Commission. 

  • What should I know about "PONZI" schemes?

    A Ponzi scheme is a "house-of-cards" swindle in which a few initial investors are paid interest from the funds collected from later investors. Those at the end of the line end up with nothing when the "cards" collapse. The promoter pockets the remaining money. Ponzi schemes can often masquerade as tax shelters, commodities or other investment vehicles. Avoid investments with "no-risk" or "guaranteed" short term interest rates far above prevailing market rates.

  • What should I expect after I invest?

    Your work is not complete after you have selected an adviser. Regardless of who you have hired, it's still your money. Don't invest it and forget it! Here are some suggestions to help you monitor your account:

    • Schedule meetings with your adviser at least annually. During the meeting ask any questions regarding your account. Check to make sure the plan you agreed to is still being used. If there is a change in strategy make sure you understand why and have it put in writing. 

    • Get it in writing! Don't rely on verbal representations that are not contained in an agreement or offering document. 

    • Review your statements. READ them carefully and if you are unclear about anything, call your adviser. If they are unable to answer your questions to your satisfaction, call their manager or the Department of Commerce. 

    • Ask your accountant or other professional to review your account annually. This is a good way to receive a second opinion and to check your financial picture. 

    • Don't invest if you don't understand. Your adviser will make suggestions about various investments. Make sure you understand the risk, the amount invested, and if there are any restrictions to withdraw your money. 

    • Have a healthy dose of skepticism about your investments. Place your faith and trust in your adviser carefully. Always monitor your account and question anything that you are unclear about. 

    • Maintain control of your finances. Remember you are receiving advice. You may take it or reject it. It's up to you how, when, and with whom you invest.