Know Who You Are Dealing With

Lynn EvansGiven the breach of trust of many so-called investment managers, financial planners, stock brokers, financial advisors, or whatever name they are calling themselves today, it is no wonder why people are so fearful of handing over their life’s savings to anyone.

But is it just the recent overall devastation to people’s portfolios that makes them more suspicious about their advisors? Did this broadside salvo to their investment portfolio cause them to question their statements in an effort to lay the blame at someone’s feet? Or did the loss of value in the portfolios cause the schemes so easily perpetrated in an up market to unravel in a much more visible and precipitous way?

Whether it was an internal rush for answers between the advisor and the client or the external mounting pressure to keep up the games that forced the bad apples to start to smell, the knowledge of who you are dealing should be a high priority.

In August, a very friendly chap, the kind you would want to invite to your child’s graduation and your daughter’s wedding, one you would trust with your mother’s money, was not only barred from the industry but indicted by the US Attorney’s office in South Carolina. Seems he was taking money from widows and Alzheimer’s patients and having a really good time on their money. He paid for his son’s wedding and many other amenities from the money he gathered from unsuspecting clients who trusted him implicitly. He pulled off this scam for over twenty years. He was tripped up by the daughter of a woman who wondered why her mother never got any statements showing performance of the funds in the annuity. The fool offered her a bogus $10,000 certificate if she would not go to the authorities. Dumb move #1! Then he offered her a letter he told her came from his compliance department stating that he was reprimanded for his intransigence. Except he made up the letter. Dumb move #2! She called his bluff and went to the authorities who lowered the boom.

Needless to say, he got the book thrown at him.


But what prevents that from happening to you? À la Madoff, these perpetrators are without question, the friendliest, most engaging, enrolling, extroverts around. Why shouldn’t you trust them? Especially when your friends and family recommend them. The stories abound on a national regional and certainly local level of those who were the most respected and well-known who have fleeced money from the savviest and the brightest.

What can you do to learn about whom it is you are dealing with? Well, fortunately, there is a database of complaints, warnings, suspensions and outright indictments of people in the business. Some of them have not mended their ways and were barred for life from the business. Others have had their wrists slapped and warnings issued and it seems they have found the straight and narrow. But, of course, buyer beware.

If you use your search engine on the Web, you can simply enter, “broker search” and end up at a site fed by FINRA (the acronym for the Financial Industry Regulatory Authority). At this site, this self-regulatory agency collects data that, for most of us, would normally be under the radar. This agency can tell you a lot of information about anyone who is registered to sell securities. All you have to do is put in the person’s name and lots of information will show up: where they are employed, how long they have been employed by the current employer, who they worked for in the past, and most importantly, if there are any Customer Disputes, Disciplinary, or Regulatory Events on record for this person.

"...the few minutes it takes to get that information is worth a lifetime of pain and self-incrimination."

And of course, not all people are on this registry. Those who are Registered Financial Advisors or a representative of this Registered Investment Advisor, like me, will not show up on that website. We are covered under a different authority, the PA State Securities Commission. Again, search for it by name. Once you get to the site, choose the Enforcement page, and then the Request for Information form. You can select the name of the person and/or the advisory firm you would like information on.

It may appear that it is a tedious and maybe onerous chore to find out what there is to know about the people you trust to manage your money. But when you consider the alternative, the few minutes it takes to get that information is worth a lifetime of pain and self-incrimination.

Last modified onTuesday, 19 March 2013 15:52

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