Can You Trust Your Financial Advisor?

Here's how three families found financial advisors to help secure their wealth


  • What licenses do you hold?
  • Are you registered with the SEC, a state, or the National Association of Securities Dealers (NASD)?
  • What products and services do you offer?
  • Can you only recommend a limited number of products or services to me? If so, why?
  • How are you paid for your services?
  • What is your usual hourly rate, flat fee, or commission?
  • Have you ever been disciplined by any government regulator for unethical or improper conduct or been sued by a client who was not happy with the work you did?
  • Will you send me a copy of both parts of your Form ADV?*
  • Are the firm, the clearing firm, and any other related companies that will do business with me members of Securities Investor Protection Corp. (SIPC)?†

    *This question is for registered investment advisors who must file Form ADV to register with the SEC or their state. The form contains information about an investment advisor and business operations, as well as disclosure about any disciplinary events involving the advisor and key personnel.

    †A clearing firm is a larger brokerage firm that handles trades for smaller brokers. The Securities Investor Protection Corp. is a private, nonprofit corporation that insures up to $500,000 worth of securities and cash in an individual customer’s accounts at member brokerage firms. SIPC insurance protects you against the failure of those firms but won’t cover your losses from market declines or fraud.

    Broker Scams to Avoid
    You’ve made the commitment to work with a broker or financial advisor. Here’s how to avoid being scammed:

    • Licensed broker gives “hot stock tips” or pressures you into a “can’t miss” opportunity. There are no “can’t miss” investments. If your broker wants to rush you into something, beware. This may signal a “pump-and-dump” scheme, where scam artists create false excitement about a stock to get investors to buy and hold — driving the price up — then sell, leaving investors with shares of a worthless company. Don’t ever feel like you will miss an opportunity to invest. Good investments are always available.
    • Broker or advisor does not provide information about investments he suggests. If your broker doesn’t respond to your request for more information about a suggested investment, or is reluctant to explain suggestions, he or she may be out to gain a commission. Avoid being steered toward investments that are not appropriate for your needs or may even be fraudulent. Failure to disclose information about investments is illegal. Make it a point to understand what you are investing in.
    • Broker or advisor purchases securities or adjusts assets without consulting you first. While you may appreciate a proactive advisor, if he or she buys large blocks of securities without your approval, there may be another agenda. Moving your assets around unnecessarily could cost you high fees and commissions.
    • Unlicensed individuals, such as independent insurance age
      nts, selling securities.
      If an insurance agent offers to manage your stock

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