- FINRA HISTORY. FINRA maintains a database of a broker’s activity in the securities industry, including his/her employment history as well as all complaints that have been lodged against him/her. Check to see if your broker has bounced around to various investment firms. See if your broker has any prior customer complaints and disciplinary actions taken against him/her. Investors can review any broker’s prior complaint history on FINRA’s “BrokerCheck.” See www.finra.org.
- INTERNET RESEARCH. “Google” the broker. Investors can learn an incredible amount of information about brokers simply by performing an Internet search. Check out the broker on professional websites such as LinkedIn. See if the broker is on Facebook, and what type of information he/she posts. Educate yourself about who this person is; after all, you will be entrusting him/her with your money.
- INVESTMENT STRATEGY. Find out what the broker’s plan for your money would be. What types of products does the broker intend to sell to you? How often does the broker plan on meeting with or speaking with you? It is important that investors are able to understand what investments they have, why they have them (e.g., for income, safety, stable returns, etc.), and that they are comfortable with how their investments are being managed.
- PAYMENTS. Make sure that you have a firm understanding of how your broker will be paid (and how much he/she will be paid) for providing services and recommendations to you. Is the broker paid a management fee for overseeing your account? Does the broker earn commissions for the products sold to you? Does the broker earn bonuses for hitting certain targets by either his brokerage firm or by the investment products themselves?
- REFERENCES. You ask for references for baby sitters, mechanics, and house cleaners. The same should apply for a financial advisor. Ask the broker if he/she would mind providing you with some references of current or prior clients for you to contact. It would be a good idea to speak with someone who has been with the broker for a long period of time as well as a very recent client.
