/ Category: In the wake of the recent 300-million dollar investment scandal in Sarasota, financial advisor Ken Himmler has five questions every investor should ask before selecting a financial representative. View this link to hear Ken’s recent interview on Tampa Bay’s Channel 10.
http://www.tampabays10.com/news/local/story.aspx?storyid=98649
1) Does the advisor have a clean record? Regulatory bodies such as the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) provide on line resources for investors to research in any complaints have been filed against a financial professional. Third party resources, such as the National Ethics Bureau, allow for consumers to gather the comprehensive background information of a financial professional.
FINRA http://www.finra.org/brokercheck
SEC http://sec.gov/investor/brokers.htm
#2 Does your financial representative have custody of your financial accounts? Firms that have full custody of your financial accounts are technically in the position to liquidate those accounts. Advisors with custody do not have strict regulatory channels to go through when making trades on your behalf.
#3 Where is the advisor recommending you put your money? Be involved in your advisors investment strategy and don’t be afraid to check their work and ask questions.
#4 Does your financial representative invest your money in private funds? Hedge funds are private investment vehicles and are only lightly regulated. Often, the person who sells and manages the fund is also the controller of invested monies and is the one responsible for verifying the fund amount to any regulatory party.
#5 Is your financial representative held by fiduciary rules or rules of suitability? Stockbrokers otherwise referred to as registered representatives, are typically only held to the rules of suitability, rather than fiduciary responsibility. Suitability rules mean if the broker or manger loses your entire account value while under his or her management, but can establish you were an accredited investor or could afford the loss; their liability for the loss would be limited. Investment advisors, financial planners, and similar are subject to higher regulatory guidelines meaning they are liable for the overall financial strategy and could be held liable if they were to lose a significant portion of one’s investment portfolio.
Tags: background check, financial advisor, Financial Industry Regulatory Authority, Securities and Exchange Commission
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