You work hard for your money. Because of that, you want to make sure it’s invested properly and will return the maximum amount. Ofcourse, there is no guarantee that an investment will return any profit, and there’s always the possibility of taking a loss. To increase your chances of making money, you may want to think about hiring a professional–but you also want to be sure you can trust them, which means finding out more about them.
Following are a few tips on how to do a background check on an investment advisor:
Begin the Process
Hiring an investment advisor can be simple or complicated, depending on how deep you want to dig. You can begin the process by asking your friends and relatives if they can recommend one to you. If they do, ask them if the person seemed to be on top of the investment business and how they treated the investor. If you receive nothing but positive reviews, you may be ready to proceed with the next step, which will be a preliminary interview with the investment advisor. The initial interview needn’t be anymore than a quick get together to get to know them. A more detailed interview can be conducted later on.
Are They Registered?
In order to become a professional investment advisor,a person must be registered to do so. If they handle large amounts of money,they must be registered with the United States Securities and Exchange Commission (SEC.) If they generally handle smaller amounts of money, they must still be registered with the security agency of the state in which they do business. If they work in multiple states, they must register in the state in which they do the most business. A professional investment advisor is responsible for handling other people’s money, which makes everything they do subject to public scrutiny. That fact alone makes doing a background check easier.
Central Registration Depository
Information about most brokers, investment advisors,and financial planners–and their firms–are collected in a computerized database called the Central Registration Depository (CRD.) By accessing the CRDdatabase, you can find out if the investment advisor you’re considering hiring is registered in your state.
You can also find out whether or not they have had a history of complaints filed against them by investors, or if they’ve had any arguments with people in authority. Through the CRD, you can also find out what their educational background is, and their employment history. Gaining access to the CRD can be accomplished by getting in touch with the securities regulator in your state, or by contacting the Financial Industry Regulatory Authority(FINRA.) These agencies should be able to provide you with the required pertinent information–your state’s securities regulator will probably be able to supply more in depth information, but the FINRA may also provide pertinent facts.
In order to find out about an investment advisor,you will need to read their form ADV, which contains information on theirbusiness history. It comes in two parts. The first part contains informationabout their business, and whether or not they’ve had problems with regulatorsor clients. The second part pertains to a ‘brochure,’ which is a writtendisclosure statement. The ‘brochure’ outlines the advisor’s business practices,fees, conflicts of interest, and disciplinary information.
InvestmentAdvisor Public Disclosure
Access to an investment advisor’s form ADV can begained by visiting the Investment Advisor Public Disclosure website at; www.adviserinfo.sec.gov. Bynavigating through the website, you can read the form, and if you have furtherquestions you can get the address of the securities regulator in your statefrom the website.
Conducta Personal Interview
Once you’ve decided upon an investment advisor, you should schedule a personal interview with them. The best way is do it is in a series of personal interviews. Your background check will provide you with questions to ask during the interviews. If they’ve had any complaints filed against them, you should give them the opportunity to explain the details. If their version is substantially different than the ‘official’ version, it should raise a red flag, and you may want to look elsewhere for an investment advisor.The facts contained in a background check are important, but conducting a personal interview may give you insight into their character.