Know Your Investment Professional

Dec 28, 2016 / Author Vernon Litigation Group
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Investment professionals are very creative in marketing themselves to new customers. Some offer free seminars coupled with lunch or dinner. Some set up booths at trade shows and conventions in order to falsely imply association with, or endorsement by, a particular trade group or organization. Some even prospect for customers at church. Without the information you need, you could unknowingly trust your investments to a broker with a history of customer complaints. The following general tips should help you find a reputable investment professional and help you protect yourself from incompetent and deceptive stockbrokers, investment advisors, financial planners, and other investment professionals.

Investigate Your Stockbroker

The Financial Industry Regulatory Authority(“FINRA”) provides a system for checking the background of almost every registered stockbroker (and many other investment professionals) in the United States. The Central Registration Depository (“CRD”) system contains brokers’ employment and licensing history, along with a record of any customer or regulatory complaints.

You can and should obtain a CRD report on your current broker or any broker you are considering hiring. The report is free and available to the public. For a CRD on a particular broker, click on the “Investigate your Broker” at the top of this screen and we will get you a CRD report at no charge. Hopefully, the report will reflect that your investment professional is qualified and free of past problems with customers, employers, and regulators. If not, you should reassess who you are trusting with your money.

Recognizing the Red Flags

Finding an investment professional is only the first step. You also need to look out for these common red flags or warning signs:

  • You are uncomfortable with your investments. Your investment professional should address your needs and comfort levels in terms of risk and liquidity;
  • You did not approve your investments. Your investment professional should never make any trade without your consent, absent prior written authority to act on your behalf;
  • Your investments continue to lose value. Your investment professional should monitor your portfolio and advise you promptly and appropriately when adjustments are needed;
  • Your retirement plan is not on track. Your investment professional should help you establish, implement, and maintain a long-term and specific investment plan that includes a suitable asset allocation and diversification policy;
  • You pay high fees. Your investment professional should fully and accurately disclose all compensation received as a result of your investing in a recommended product or strategy;
  • Your questions go unanswered. Your investment professional should fully and honestly respond to all of your questions and concerns.

Remember, you are entitled to ethical and competent service on an ongoing basis and you should always receive it.