Using a Financial Advisor? Check their “rap sheet” early and often

Most people in the financial industry are honest.  But we don’t usually hear about them.  Instead we hear about a financial advisor like Bernie Madoff.

Fortunately those are few and far between.  But don’t just assume you are safe.  According to the Wall Street Journal, about one in eight brokers or advisors has red flags on their regulatory filings.  These red flags can include customer complaints or other problems that you need to know about.

In addition:

  • An estimated 70,000 advisors have at least one disclosure
  • Nearly 3,000 advisors have at least five disclosures

What are these disclosures?

  • Customer complaints
  • Bankruptcies
  • Criminal charges
  • Regulatory actions or terminations

If you’re like most people and don’t know where or how to check, you may be unknowingly working with one of these advisors.   Not good!

Invest 3 minutes and find out!

Fortunately, the Financial Industry Regulatory Authority (FINRA) provides an easy way to check the disciplinary records and history of a financial advisor or broker.  You only need to do one quick search to find your advisor and their firm to get the facts.


Go to and fill in the information to look up the firm or individual.  The results are presented in a user-friendly graphical timeline so you can see information on:

  • The individual’s employment status and history
  • industry registrations
  • any “reportable events” such as customer disputes or disciplinary actions

Good, but not perfect

Unfortunately, this is a good resource, but it’s not perfect.

  • First, the information on BrokerCheck is largely self-reported.
  • Second, it is possible that negative disclosure events may have been removed (‘expunged’) from an individual’s record.

But even with these limitations, you can’t afford to miss critical information, so don’t let that deter you.

What to Look For

  • Disclosure Events – This is the big one.  Look for regulatory events, customer disputes, terminations, judgement/liens, and bankruptcies.  Any of these are of considerable concern.
  • Work History – Problem individuals often change firms frequently.  If you see this on an advisor’s record, this can be a sign of problems.
  • Required to Pay Restitution or Fines – If the individual has paid fines or restitution to a client, this is a definite red flag.  You should consider switching advisors—it’s just not worth the risk.

Other Sources of Information

Fortunately there are other sources of information.  There are independent financial advisor rating agencies, such as the Paladin Registry, which provide even more information on the business practices of advisors, along with information on their compliance records.

You can also check with state agencies for further information.  There’s no centralized source, but contact information for each state’s regulatory agency can be found on the North American Securities Administrators Association website.

Don’t Risk It!

When your life savings is at stake, you cannot afford to give someone the benefit of the doubt.

When you’re looking to hire or switch advisors, always check before making the move.  Then, even if you have an advisor and things are going well, always plan ongoing checks.  It’s a good idea to have an “annual checkup” that includes a broker check at least once per year.

In this case, it’s always better to be safe than sorry. 

Jeanne Klimowski is Founder of Wavelength Financial Content Inc., a provider of employee financial wellness programs and digital content for financial advisors.

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