Improving Investor Savvy Part II: Investigating Your Financial Professional

By: La’ Nise Harrington Spring 2017 Student Intern

Would you give your money to a stranger for safekeeping? Probably not, at least not without figuring out how trustworthy they are. So why would you do the same with your broker or financial professional? While they might owe you a fiduciary duty, a fancy office and a company name does not negate the fact that they are still a stranger. Part II of Improving Investor Savvy adds a second question from FINRA’s July 2015 National Financial Capability Study you should ask in order to increase your investment knowledge and improve your investment behavior.

Have I looked up the background of my financial professional?

If you have not looked up your financial professional, you are not alone. FINRA’s July 2015 National Financial Capability Study reports that only twenty-three percent of investors with a financial professional have investigated their background. However, everyone should. Every investor should know at least these three things about their financial professional:

  • How does my financial professional get paid?
    – Why ask this? Your financial professional may be paid by the transaction, through commissions or through an account management charge. How he is paid may motivate how they invest. For example, if by commissions they may be tempted to churn your account, and you should be aware of this.
  • Is my financial professional registered?
    – Why ask this? A financial professional is required by law to register in order to sell securities or offer investment advice.
  • Does my financial professional have a disciplinary history?
    – Why ask this? Previous regulatory actions and complaints can be signs of misconduct.

Luckily, these questions can be answered easily by reviewing your account documents and by using FINRA’s BrokerCheck.