Background Checks and Due Diligence

By on May 1, 2013. Posted in .

You know your financial advisor, right? You’re related. Or you’re friends. Maybe, you’re friends of friends.

Personal references are always good to seek, but they-and most references-are often selective. When your wealth is involved, we suggest background checks as a first step in evaluating a current or potential financial advisor. Here’s why:

Employers check prospective employees’ backgrounds. Organizations in which employees or volunteers serve children, the elderly or the disabled undergo the same examination. Creditors perform credit checks. The list goes on and on. Why not conduct a check of your financial advisor.

Start here

These checks can occasionally prove inaccurate and are sometimes incomplete, but, in the case of investors, a background check of your financial advisor can yield some basic information, including:

Disciplinary actions taken


Basic professional background

FINRA, the Financial Industry Regulatory Authority, offers a free background check tool called BrokerCheck to help start the process. Among other items, you can learn about professional exams passed and disclosure events such as criminal and civil proceedings, arbitration, regulatory actions and customer complaints.

Sorting through the information

We caution you that credentials don’t always ensure expertise, just as complaints that don’t result in actions won’t necessarily prove a negative. Likewise, you can’t predict a bad apple through this tool when the financial advisor has no negative history. Some of the most scandal-plagued advisors were clean before the sky fell on them and their clients.

And one last caution: FINRA’s BrokerCheck has a database of 1.3 million names. Doing your due diligence can be time-consuming, but we can help. At WealthGuard, we leverage our years of experience inside Wall Street firms to give you information you can use when you need it.

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