How Can You Tell Whether Your Investment Advisor Has a Good Reputation?

by Justin Weinger on October 30, 2019 · 0 comments

Making the leap to investing rather than saving your money is a big decision and one you wouldn’t have taken lightly. Once you’ve made it, you must then find a person you can trust more than almost anyone else in your life: your investment advisor. You will entrust what may potentially be a significant chunk of your life savings to somebody who is a virtual stranger. So, how can you tell if they are the real deal or a bit of a cowboy? How do you know if they hold good standing within their peer group or are considered to be a loose cannon and someone to avoid at all costs? Here are several ways you can practice due diligence and make sure you’ve aligned yourself with someone reputable.

Use an Online Search Tool

It might sound basic, but you can’t go wrong with an online search to check the advisor’s reputation and to separate the good from the bad. As many as 95 percent of people will share a bad experience with someone else, and 45 percent of people will share that experience through social media channels, so you can be sure that if there’s anything of caution you should know about, you’ll likely find it out searching online. Happily, good reviews are broadcast too, with 38 percent of people sharing great experiences through social media, and 87 percent of people telling someone about it.

Use the BrokerCheck Online Tool

The industry is keen to make sure you’re protected too. FINRA’s BrokerCheck tool allows you to research investment advisor’s backgrounds, tells you whether they are registered to offer investment advice, and (most importantly) pulls up their employment history, licensing information, arbitrations, and any complaints made about them. A complaint registered on FINRA isn’t always black-and-white; before you pass judgment, look at the detail, as a broker has to declare a claim even if they feel it isn’t valid and has denied the complaint. However, it gives you full transparency and allows you to research your advisor further should you wish.

Use the SEC Action Lookup Tool

The SEC (Securities and Exchange Commission) offers a lookup tool where you can plugin your investment advisor’s name and see if the SEC has brought any formal action against them. It’s a comprehensive tool and will show you all practitioners who have had a judgment or order issued against them, even if they settled or contested the action. It’s worth noting that if no judgment or order was issued, there will be nothing on record, and it will also not show anything currently pending.

Speak to Your State Securities Regulator

Another way you can check the advisor’s reputation is by speaking with your state securities regulator. NASAA (the North American Securities Administrators Association) is there solely to protect investors from harmful people within the industry and to enable them to make informed investment decisions. If there is something of concern to know about your investment advisor, this is the body that will help you find it out. They can also answer any other questions you have at the same time.

Ultimately, putting the safety of your money in someone else’s hands is a huge demonstration of faith. You need to know that the person you’re entrusting with your family’s future is decent, not only within their industry but also that their ethics and moral compass are sound and above reproach too. After all, do you really want to become involved with somebody who may be excellent at their job but has a reputation for being a wild card in their daily life? Do your research, find someone you believe in, and get your money working hard for you.

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