Have you used BrokerCheck to perform a background check on your financial advisor? Don't worry. If not, you're not alone. In a casual survey, I found that only a small percentage of investors were familiar with BrokerCheck, a free tool from FINRA (the Financial Industry Regulatory Authority) that can help you research the professional backgrounds of brokers and brokerage firms, as well as investment advisor firms and advisors. Among those who knew about it, a smaller percentage had used it. In an effort to change that, the SEC (Securities and Exchange Commission) recently approved FINRA Rule 2210 requiring broker-dealers to include a “”readily apparent reference and hyperlink”” to BrokerCheck on their websites.
How to Use BrokerCheck to Perform a Financial Advisor Background Check
I have been doing an increasing number of Free Portfolio Reviews lately. It is nice to know that investors haven't yet entered the summer doldrums. Typically, our team will review an investment portfolio to help you understand:
- If you are taking too much risk.
- If you own investments that are unsuitable or inappropriate for you.
- If you are paying too much in fees.
For those whose account is currently being managed by a financial advisor, I like to also search BrokerCheck in order to do a quick background check on the advisor and his/her firm. In this post, I share with you how I use BrokerCheck in hope that it will inspire and help you use it too.
Buyer Beware: Your Broker is a F*@#ing Crook!
Now that I have your attention, I have no idea if your broker is a crook or not. But if you do one thing today, go to BrokerCheck to perform a background check on your financial advisor. Hopefully yours has a clean record and not several red flags against them.
In baseball, you get three strikes and you are out. In other professions, it may only take one or two strikes to get tossed. But at the self-regulatory organization FINRA, the Financial Industry Regulatory Authority, that oversees the brokerage industry, it could take 69! The New York Times just wrote a lengthy article about a stockbroker who received 69 customer complaints over 13 years before finally being barred from the business in 2014.
Double Your Pleasure at BrokerCheck With Two Types of Advisor Searches
Many investors feel the need to perform due diligence when hiring an advisor. However, few actually go beyond a quick “google search” or asking for feedback among friends. Completing a check on your advisor is especially important in the wake of massive ponzi schemes like Bernie Madoff. Even institutional investors, such as the board of trustees of a pension fund, should regularly review the professional backgrounds of the brokerage firm and individuals which serve as its financial advisors.
70,000 Brokers Don’t Have a Clean Record. Check Yours At BrokerCheck.
I don't know about you, but I am tired of reading about thieves posing as advisors who steal or lose their clients' money. Celebrities are too often the target, but the minute you say, “It can't happen to me,” look out, don't let your guard down.
According to the Wall Street Journal, about one in every eight brokers has red flags including complaints or other problems disclosed in their regulatory filings. It is caveat emptor since 70,000 brokers have at least one disclosure, nearly 3,000 brokers have at least five disclosures, and they are all out there still working with clients. Don't give these brokers the benefit of the doubt. It isn't worth risking your hard earned savings.
Do Your Interests Come Before Your Advisor’s?
What You Need to Know About Advisors, Brokers and the Fiduciary Standard
On October 29, 2013, the US House of Representatives passed a controversial bill that delays the US Department of Labor and US Securities and Exchange Commission from adopting rules requiring brokers and retirement account financial advisors to put their clients' interests before their own. Let's cut through the confusion of bipartisan rhetoric, complexity of two government regulators, and resistance from many of Wall Street's biggest firms.