How To Examine Your Financial Advisor

The securities industry has been created in such a way that it seems that all the financial advisors who are selling investment products are highly successful, finance majors, vice presidents and so on. Investment gurus who will be great with your money. The reality is that this is not always the case. It’s just the illusion of art. Therefore, it is important to ask the right questions to make sure you are getting the right professional. The reality is that the brokerage industry, like any other industry, has good financial advisors and bad financial advisors. Here are some tips to make sure you’re getting a good 6

(1) FINRA brokercheck

The first tool you should use to check your financial advisor is FINRA BrokerCheck. Brokercheck is a universally available tool. You can go to and there is something called Brokercheck in the top right corner of that website. You can literally type a person’s name, press Enter and you’re going to get a BrokerCheck report that will give your financial advisor details of all the information you need when verifying.

The brokercheck will be able to tell you how the advisor did their licensing test, where they were hired, where they went to school, if they were ever charged with anything criminal. Have they ever declared bankruptcy? Have they ever been sued by a client? Have they ever been fired by their brokers? These are just some of the goal setting shareware that you can use.

The first thing we do when accepting clients is to look at their brokercheck reports. We begin to leak this information to potential clients about their advisor and they are often surprised. We are not magicians and I do not know every financial advisor. Literally all we are doing is pulling out this publicly available information and looking at the report. And many times we tell a potential client that their advisor has already been sued more than once and the investor had no idea.

Obviously this was important information to know in the beginning when deciding to work with that person. If they had pulled that report, if they had known that the person they were considering had been sued 26 times before by their former clients, they would never have gone with that person. So obviously, the first thing you should do is pull that report.

(2) Questions to ask

The first good question to ask a potential broker would be “How do you get compensation?” Not every financial advisor is compensated in the same way. Some of them are compensated on the basis of commission, which is per transaction. Every time they recommend you and you agree, they pay. Some of them are being paid as percentage of assets under management. If you have a million-dollar portfolio and they make up 1%, they’re going to make বছরে 10,000 a year.

You can determine what you are looking for based on what type of investor you are. If you are a buy-and-hold investor, then maybe a commission model is understandable for you because you are only trading two or three times a year. If you trade a lot and have a very active relationship with your advisors then maybe the resources under the management model will be more understandable. But ask the question first and foremost so that you know and it is not vague.

The second question is, “Does a financial advisor have a trustworthy responsibility to you?” Ask them the right question because the brokerage industry will take a position that they do not. From their point of view, their obligation to you is to recommend appropriate investment. This is much less often because sometimes an investment may be right for you but not necessarily in your best interest So just ask your financial advisor, “Do you consider yourself to be loyal to me?” Let’s figure it out at the beginning of the relationship to make sure you stand where you are.

Another question you should ask is, “Who are you registered with?” Lots of financial advisers out there are independent and they’ve got a “doing business”, no matter where their office is, but they’re registered to sell securities through a large brokerage firm. Find out who. Do some research to make sure you are involved with a brokerage firm that would expect the kind of supervision and compliance you would expect.

There are two types of brokerage firms. There’s the Morgan Stanley model where they have brokers’ hubs in a big city. Maybe 30-40 brokers in one office. There are compliance people, there are supervisors, there are operations people – all in the same local office. In my experience you see less problems in this kind of situation because all the caretaker people are there.

On Flipside, there are independent models – it’s an advisor somewhere in an office and their consent is Kansas City or Minneapolis or St. Louis or whatever. The supervisor comes to the office once a year and audits the book and reviews the advisory activities of the previous year. These visits are usually announced in advance. Obviously supervision is very different in that context. And that’s the type of firm where we see more problems.

You want to make sure you are engaging with the right firm. The firm that is overseeing your financial advisor is protecting you, making sure that if they do something wrong they will catch it before it is harmful to your account.

Another good question to ask is, “Have you ever had a conflict with your client?” If they say yes, ask them to explain it to you. No one is perfect and you can’t keep everyone happy so if you have a hundred clients and you have been in business for 10 years then you may have someone who has bothered with you at some point. However, it may not reach the level where it worries you, but ask about it, talk about it.

Ask about their investment background and their purpose. Not every financial advisor does it the same way. You want to make sure that their goals are consistent with yours and that their vision is consistent with yours.

And finally you should ask “Do you have insurance?” The brokerage industry does not require brokerage firms or financial advisors to carry insurance. Many of them do but they don’t have to. Why it might be significant, of course, in that worst case scenario and you have a conflict with your advisor, you want to be with at least one financial adviser so that if they do bad things you get some protection. So ask them, “Do you have E&O insurance for this?” If not, it’s a red flag. Either because of collectibility concerns if you find yourself in a situation where you have to sue your advisor or it may be a suggestion that they are not conducting their business in the best way possible because financial advisors must have E&O insurance.

(3) The next thing to consider is a potential warning sign. These can be present at either the initial meeting or at the beginning of the relationship:

– They rush you to make a decision. We see this in many of our cases where they come to your meeting and say, “Sign here, here and here. I got an appointment in 15 minutes. Call me later if you have any questions.” This is a clear warning sign. It should be clear to most people. But I think a lot of people are afraid to raise it because they think, “Oh well, he’s too busy.” And he thinks he’s got a lot of clients and he’s really successful. So maybe it’s just that he doesn’t have time for me. No, that’s not right. Find someone who has time. Your advisor is paying you to manage your account so work for them

– They don’t tell you what they are being paid for. This is certainly a warning sign. The main reason for most securities fraud claims is commission – advisers push high commission products that harm their clients and benefit them. This is a problem if the advisor does not disclose what those commissions are.

– They want to keep everything in one investment. This is a big warning signal. What is the motivation to do this? Most people know that diversification is important when investing, so if you have an advisor who says, “Hey, let’s use this investment, it’s the best, it’s the best, we’ll put everything in it.” This is another warning sign.

– They want to see you alone. What will be the inspiration? Say you are an adult and you want to bring your child to a meeting for support and your counselor did not say … this is a warning sign because obviously if they are upstairs they will not have any problem sitting in the crowd, make sure you take care Being.

– This is a problem if your advisor does not spend time with you (initially and then regularly) asking about your actual investment needs (goals, time horizons, risk tolerance, etc.). Investment is not vanilla. Not every investment is perfect for every person. Each investment depends on your specific situation. If your advisor doesn’t ask you what your situation is – your total value, your income, your investment purpose, your investment experience, your goals, it’s a huge red flag.

– If your account statement does not come directly from the brokerage firm, it is a red flag. If the statements come directly from your financial advisor and you do not see anything there about the brokerage firm you are clearing through, this could be a problem. It could be a financial adviser who is hiding losses or sending you statements that are not based on reality. Most brokerage firms do not allow their advisors to create monthly reports or if they do, they must first be approved by review and consent. If there is nothing in the statement that clearly indicates that it has been reviewed / approved / approved by the advisory broker-dealer employer, this is a problem.

– If they ever ask you to do a check individually, that’s a problem. Brokerage firms have been established to ensure that this type of thing does not happen and so if your advisor did it, most likely it was not approved by their firm.

– If you face huge losses without any reasonable explanation, of course it is a problem. Many brokers will tell you “it’s the market” or “the forces are out of my control.” This may be true but you want to talk about it and make sure you get a reasonable explanation.

Here are some tips to help you choose the right financial advisor. This is an important decision, and should not be taken lightly and without notice.