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Finding A Broker or Investment Advisor: Who Can You Trust?

When looking for a broker or an investment advisor, of course, the idea is to find someone that you trust who will work with you to meet you financial goals. However, often individuals are lured by flashy advertisements and promises of great return on their money.  People trust what they hear and often fail to research brokers, investment advisors, and/or their firms.  Unfortunately, researching an individual and asking tough questions may go a long way in avoiding become a victim of an investment scam.

Investors should know that federal or state securities laws require that brokers, investment advisors and their firms to be licensed or registered. Additionally these groups are required to make particular information publically available.  The U.S. Securities and Exchange Commission (SEC) suggests that prior to investing or paying for investment advice you should check to see whether the individuals you are consulting are registered or licensed and whether they have been disciplined in the past.  The Central Registration Depository (CRD),which is accessible through the Financial Industry Regulatory Authority (FINRA), is the place to do this.  Further, the CRD will provide information about the brokers’ education and employment history.

Do not be afraid to ask questions of potential brokers or investment advisors.  Interview them and do it thoroughly.  Also, interview more than one, preferably more than two. Remember these are the folks who will be assisting you in reaching your financial goals and who will make recommendations to you that will affect your financial wellbeing.  

Ask these individuals how they are paid and what benefit they get from investments that you make.  Often they receive commissions from your investments, which could dictate which investments they propose to you.

Do not be fooled by guaranteed promises of big returns. Ask about risk and if someone tells you there is no risk then you need to do more research. Investing involves risk to some degree.

At the end of the day, treat the process of finding a broker or investment advisor as you would hiring an employee. Ask questions and interview more than one applicant.