Do you know what the FINRA BrokerCheck is? The Financial Industry Regulatory Authority (FINRA) is a governing body for financial advisors and they offer a free tool to check the background of your advisor. They say “BrokerCheck is a place to help investors research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers, as well as investment advisor firms and representatives. It will list licensing status and history, employment history and, if any, reported regulatory, customer dispute, criminal and other matters. It should be the first resource investors turn to when choosing whether to do business or continue to do business with a particular firm or individual.” Up until recently, it did not include all of the negative information that FINRA requires.
Recently, a client came to me to review their cash flow and see how prepared they were for retirement. I was absolutely blown away by what they had. Every single amount of money they had was dumped into some annuity or permanent insurance contract. They do have a low tolerance for risk but this is an immediately red flag. Annuities and permanent life insurance policies can serve a purpose but I do not believe it should be your entire retirement plan. The high fees and illiquidity make these products unfit for retirees. I decided to do some investigation through the FINRA BrokerCheck.
Upon reviewing this “financial advisor” on the FINRA BrokerCheck I saw that he had 16 settled complaints and 3 pending! The allegations all sounded the same. The client alleged that the registered representative recommended variable annuities that were not suitable… You don’t have to be an Einstein to realize that this advisor was pushing product faster than his company could serve it. But this wasn’t the only disturbing thing. He had resigned from his previous insurance company because he was in the “midst of a significant investigation involving his business practices and personal finances.” The client told me that the advisor moved because the other insurance company had a better product. Wow!
I truly believe that most individuals and families need financial advice either on an as-needed or ongoing basis but I can see why people avoid advisors like the plague. Before you sign up with an advisor, do your homework. I believe that transparency should be the beginning of a relationship. The National Association of Personal Financial Advisors (NAPFA) has some great questions to ask advisors but I would also recommend that you check their history before meeting with them. If an advisor has a complaint, ask them to explain why. You might be surprised on what you find on FINRAs BrokerCheck.
It’s always better to be prepared.