How to Find a Trustworthy Financial Advisor
Some financial advisors are just in the business for their own game. If one of your goals for the New Year is to set up a relationship with a new financial advisor, there are some things you need to watch out for to make sure you don’t end up with a con artist.
The following tips come from Andrew Stoltmann, a Chicago attorney who specializes in investment fraud.
#1 Do a Background Check
Before surrendering personal information, find out everything you can about this person. Check the FINRA (Financial Industry Regulatory Authority) and SEC (Securities and Exchange Commission) for info. We also recommend reading an advisor’s form ADV online.
Don’t be afraid to ask questions. Query your advisor about education, experience, and credentials.
Know what to look for. “It’s human nature to look for clues that confirm an advisor’s honesty,” says Pat Huddleston of the SEC. “But you should look for signs of fraud instead.” Ask for references and follow up. Have any previous clients filed complaints or lawsuits? Google search the advisor’s name as well.
#2 Avoid Unsolicited Contact
Honest advisors do not hunt for business uninvited. If you receive strange phone calls asking for personal information, hang up the phone! Reputable financial professionals rarely solicit business via email either. Unsolicited emails should be viewed as red flags.
#3 Stay Alert
Never give your financial advisor control of your assets. Instead, insist that your assets be deposited with third-party financial custodians like Fidelity or Charles Schwab. Financial statements should come from the outside custodian.
Before doing business with a financial professional, make sure to read an independent auditor’s review of that firm’s finances. Beware of tiny auditors. The famous con artist Bernie Madoff used an auditor so small that it couldn’t question his activities.
#4 Beware of Guarantees
There is no such thing as a guaranteed return. Don’t trust an advisor who promises a certain percentage. If it sounds too good to be true, it probably is.
