Brokers can be a Shady Bunch: How to Be Aware
Fifty-six percent of American households hire a financial professional to help them manage their money, totaling more than $30 trillion total, according to Wealthy Retirement.That’s a lot of money to be in the hands of someone you don’t really know. As an investor, you should be on top of your broker and your investments to make sure your best interests are being taken into consideration.
Head to FINRA’s database of registered brokers and brokerage firms to search for your particular broker and do some research. A clean report on a broker will be about 10 pages long. A bad one could be up to 100 pages long. In the report, you’ll learn whether or not the broker or firm has ever been registered with FINRA, his or her work history, any customer complaints, regulatory actions or even criminal convictions.
Many can have allegations of fraud against them and still be practicing as brokers in firms on Wall Street and beyond. It seems these shady brokers are more prevalent than you may think. A new study from the University of Chicago and the University of Minnesota concluded that seven percent of active brokers have faced discipline for misconduct or fraud. More than 38 percent of them are repeat offenders.
Shockingly, nearly 75 percent of brokers who have been disciplined are still working as brokers and handling customer accounts even a year later. Half are still working at the same firm in which they were disciplined. Half of those who were forced to leave still ended up finding a new job at a new firm within one year.
One of the take-aways from the study is for investors to be extra diligent about who they’re hiring to advise them on financial matters. Starting your research on the Internet, and more specifically, FINRA, is a good place to begin. Ask family and friends who they use as brokers and whether they are satisfied or not. Check out their education, years in business, and overall reputation.
Even that may not be enough, though. That’s why it’s crucial to keep an eye on your own investments. Always know where your money is going, read every statement that comes to your inbox and don’t blindly follow advice from your broker. A deal that’s too good to be true probably is. Instead, research each pitch you’re given and make an educated decision based on what you learn and what your gut says.
If you find yourself in over your head and possibly facing misused funds by your broker, you can always lean on a trusted FINRA stock fraud broker who can get you the restitution you deserve. Thomas Law Group has recovered more than $40 million for investors nationwide.