Customer Advisory Centers: Who’s Calling You?

Law IACBy Qudsia Shafiq, Spring 2017 Student Intern

Do you screen all your calls before answering them? And only return phone calls when callers leave a message? Have you registered your number on the FTC/ FCC’s “Do Not Call Registry? While you think you may have taken all the precautions necessary to protect yourself against most cold calls, it may not protect you from all calls.

For example, you may still receive phone calls from:


  • companies you have given explicit, written permission to contact you via telephone;
  • companies with whom you have “established a business relationship” (The SEC explains that under FINRA Rules, this includes any financial transaction, money balance, security position, or account activity with a firm); and
  • companies you have contacted to inquire about financial products (securities representatives from these companies are allowed to contact you for up to three months after you’ve initiated contact).

Because of the prevalence of these phone calls, FINRA has issued an advisory alert to investors about what investors need to know about Customer Advisory Centers. It’s important to know what a customer Advisory Center is, when you’re being contacted by a representative from a Customer Advisory Center, why these calls can be a reason for concern, and the precautionary measures you can take to ensure safe and suitable investments.

What is a Customer Advisory Center?

Similar to financial products, telemarketers and call centers come in all shapes and sizes. There are some securities firms that use call centers to provide customer service to investor-initiated calls. These call centers won’t typically contact you or recommend specific investments to you (in the rare instances that they do, they are typically not compensated for selling you these financial products).  But there are also call centers that hire and compensate securities professionals for providing financial planning services and sell securities products to you: these are known as customer advisory centers, and these are the customer advisory centers that FINRA advises investors to take extra precautions.

How do you know you’re being contacted by a Customer Advisory Center?

You may be contacted by a representative from a customer advisory center if:

  • you no longer have a single broker assigned to your account;
  • your representative is employed by a company that incentivizes its brokers to sell their products or attract new money from existing accountholders; or
  • your account is transferred to one of these customer advisory centers without your consent. This may be the case if your broker or brokerage firm has sent you a letter informing you that your account has been transferred to, “enrolled in,” or “assigned to” the firm’s investment or call center.

Why is FINRA concerned with these Customer Advisory Centers?

FINRA has identified several concerns with these advisory centers:

  • Their failure to gather enough information from clients to determine whether products are suitable for you and your specific needs;
  • Luring investors into investment products or product switches by falsely claiming they will incur no fees (for example, claiming IRA rollovers are “free” or have “no fees,” or recommending unsuitable mutual fund switches from existing mutual funds to new mutual funds at “no cost” when it may leave you with higher annual fees and subjecting you to other higher charges);
  • Failure to disclose the different classes of mutual funds available to you along with failing to disclose the different costs and expenses incurred with those options; and
  • Misrepresenting or omitting key information (such as the fund’s investment objectives, portfolio makeup, historical income and yield information, expense ratios and sales charges).

How can you protect yourself?

SEC and FINRA both make recommendations about how an investor can best protect themselves. SEC’s recommendations can be found here. FINRA has outlined seven tips for a successful call center experience – including:

  1. Calling your representative or brokerage firm when receiving a “welcome” letter or any other notice about account changes or transfer to a call center or investment center.
  2. Being cautious when call center representatives recommend moving money from existing investments to new investments.
  3. Asking the representative about their compensation structure (especially if they recommend a particular investment product).
  4. Ensuring you accurately convey your financial situation, your experience with financial products, and most importantly, that the representative understands your particular investment needs.
  5. Understanding mutual fund classes and the different costs or expenses associated with each. If a mutual fund switch is recommended – get all the information and costs, ask for a side-by-side comparison of the costs and fees between the existing and recommended fund, and use FINRA’s fund analyzer to compare this information.

And of course, verify whether the caller is registered to sell securities by using FINRA’s BrokerCheck.