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Financial Advisor Abuse

August 8, 2016 | Posted In White Collar Defense

Be Sure to Research Your Financial Advisor

The internet and mandatory disclosure requirements allow us to do more research on financial advisors than ever before.

It is crucial for investors to know exactly what type of financial advisor they are working with. For instance, is he or she a broker-dealer or a registered investment advisor? There are important distinctions between these groups, particularly with respect to what their roles are regarding your investments and how they are compensated for their services.

Generally, a broker-dealer need only find an investment that is “suitable” for their client – a generally low standard. On the other hand, registered investment advisors have fiduciary obligations towards their clients – a much higher standard – and are required to put the interests of their clients ahead of their own.

The Financial Industry Regulatory Authority (FINRA), the self-regulatory organization for broker-dealers, has a database where investors can conduct background checks on their financial advisors – Similarly, the Securities and Exchange Commission has a database that can provide background information on registered investment advisors.

FINRA has provided a website – “Choosing an Investment Professional” – designed specifically for providing investors with information on how to select the person who will handle their finances.  

As with all important life decisions, be sure to do some comparison shopping. Never settle on a financial professional with whom you are uncomfortable. Meet with as many advisors as needed. Referrals are only a place to start -- always do your own homework.

What Questions Should I Ask My Financial Advisor?

Do you know what questions to ask your financial advisor about the investments he or she is suggesting? Do you know what questions to ask your financial advisor about their experience, background and areas of expertise? Consider asking some of the following questions when interviewing a financial advisor:

  • How long have you been in the business? How did you get started?
  • Do you specialize or work with only certain types of investments?
  • What types of ongoing training do you do?
  • How many clients do you have? Am I a “typical” client for you?

After a financial advisor has explained the business to you, listen very carefully to the recommendation he or she is making. Never immediately agree to any investment and promptly end the meeting if the financial advisor becomes overly aggressive or makes claims that the investment is only available for a limited time.

After a financial advisor has made a recommendation, take all available literature on the recommendation home with you and read it. Further explanation is required if you cannot clearly answer the following questions about the investment:

  • How risky (i.e., what are the chances of a loss of principle) is the investment?
  • How much is my financial advisor making off of the investment? Will he or she continue to make money off of the investment for years to come?
  • Am I able to access the invested money if I have an emergency?

Certified Financial Planners offers other questions you may want to ask.

What Should I Do if I Have Been Abused By My Financial Advisor?

If you believe that your financial professional has taken advantage of you or has not acted in your best interest, collect all the documents involved, write down your recollection of events and contact one of the New Jersey white collar crime attorneys at the law offices of Helmer, Conley and Kasselman, P.A.

We can review your situation, provide advice and, if necessary, take the necessary legal action to hold your financial advisor accountable for the harms he or she has caused.

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