How to Check the Background of Your Financial Advisor

Otmane El Rhazi from USA.gov.

Do you use or have you ever considered using a financial advisor to help you make money decisions? Before you turn over your hard-earned cash, we want to help you learn the signs of investment fraud and find out how to check the background of your financial advisor.

That’s why Marietta Jelks, the editor-in-chief of the Consumer Action Handbook, partnered with the Commodity Futures Trading Commission (CFTC) to bring you a Google Hangout answering some of your questions about this topic.

Here are some of the highlights from the discussion:

Look for red flags that signal investment fraud

• Be wary if an investment advisor or promoter says things like “risk free,” “guaranteed earnings,” “quick profits,” “the investment is government approved.” Almost all are signs of fraud.
• Watch out for investments that are billed as “limited-time offers” or are only available to a small number of people.
• Make sure to get everything in writing and read all documents so you know what you’re agreeing to.

Check the background of your financial professional

Looking into the background of a financial advisor is one of the most important steps an investor can take toward protecting their assets.

The CFTC recently launched a new tool – SmartCheck.gov – to help make it easier to do that. Through the tool, you have access to multiple databases of federal and state agencies and self-regulatory organizations that provide background information on financial advisors. It is an easy and free process, requiring no usernames or passwords.

Report investment fraud

If you have been a victim of investment fraud or misrepresentation, you should file complaints with a few sources:

• Your state’s securities regulator: It can determine if the broker or company has violated state specific securities laws.
• The Securities and Exchange Commission:  For violation of federal securities laws.
• The Financial Industry Regulatory Authority: FINRA accepts complaints about brokers and their firms.

If you would like financial compensation for your losses, you may want to seek legal action or go through a dispute resolution program.

To learn more about recognizing investment fraud and researching your financial advisor, watch the recording of our Google Hangout.