The right investment professional can be a tremendous asset. However, handing control of your money over to someone else can be a risky proposition. With so much on the line, it is vital to ensure you are working with a reputable investment adviser. Fortunately, there are steps you can take to help you select an advisor you can trust.
Investment Adviser Public Disclosure Website
If you are considering an advisor who is SEC or state registered, you may want to begin your investigation by looking them up on the Investment Adviser Public Disclosure website. You can use this website to find out their registration status and if they have had any past issues with their business practices or ever been disciplined by the SEC or other regulatory agencies. You may also be able to find out about any conflicts of interest they may have.
For an individual broker or brokerage firm, you can find registration status on the BrokerCheck website. You may also find information on which exams they have passed, their past employment history, any customer disputes they have had, and any regulatory or disciplinary actions. You may also find information on how they have resolved any negative items you might discover.
This program also allows you to research the history of brokerage firms. If they have ever merged with, acquired or been acquired by another firm, that information should be available. You also should be able to find out if they have ever operated under a different name. If they have, you may want to research their reputation while operating under their former business name. Other information that may be of interest includes, licenses and registrations, arbitration awards, and any regulatory or disciplinary actions.
State Securities Regulators
For brokers and advisers who are state registered, you may able to find additional information that isn’t available through other sources by checking with state regulatory agencies. You can find contact information for regulators in your state on the NASAA website.
After you have gathered your background information, you may want to conduct a personal interview with the person you are considering working with. This process can help you further assess their reputation and get a feel for the investor’s personality.
Ask them if they are licensed and who with. Much of the fraud that occurs in the investment industry is perpetrated by unlicensed individuals. You may also want to ask them if their license has ever been suspended and why. If they are claiming any sort of professional designations, it may be a good idea to research those designations, find out what they stand for, and what the standards of the organization that granted them are. You may also want to check with the organization to ensure they hold those credentials. It is a common tactic of those who perpetrate investment fraud to create an illusion of legitimacy by claiming credentials that they don’t have or that may not even exist. Similarly, you may want to investigate their educational background and any awards they claim to have won.
Finally, consider asking them if they have ever been disciplined by a regulator or had any legal action taken against them and if so, how they resolved that issue. You might also ask them about any customer complaints they have had and how they responded to them. When you’ve finished the interview process, compare their responses against the information you have gathered from outside sources. If there are any discrepancies, you may want to ask some follow-up questions.
If you’re nervous about hiring an investment advisor, you’re not alone. However, by conducting a thorough interview and doing some background research, you can increase your chances of choosing a reputable advisor who will be a good fit for your investment needs.