Are you searching for someone who has the skills and experience to offer top-notch brokerage services? If so, you’re probably like many other consumers who want the peace of mind that comes with knowing your broker is doesn’t have a criminal past, has the right level of training and education, and belongs to an investor-protection organization. Expect to spend time doing your homework. The effort will pay off because in the end, you’ll locate a trustworthy firm or individual with whom you can work. Here are some of the steps you should take to make sure a financial professional is legit.
Find Genuine Reviews
We’re nearly to the end of the era in which online reviews have any relevance. Still, it pays to check out any established review sites and see what the buzz is about a given individual or company. Don’t waste time with new websites and ones you’ve never heard of. The fake review universe is large, and it’s getting harder and harder to determine which opinions are real and which ones are bogus. Find as many genuine sites and write-ups as possible, and then move on to another phase of your research.
Make Phone Calls
After you develop a short list, call each of the individuals and find out how hard it is to get them on the phone, and how their telephony systems work. Are you shuttled from one department to another? Are phone operators rude or otherwise impolite? Do you keep getting recorded messages saying the number is no longer working, or it has been disconnected? If so, scratch the name from your list. If you do reach a live person, ask detailed questions about your financial situation and goals. See what kinds of responses you get. Does the service provider sound knowledgeable, polite, reassuring, and empathetic? Take notes and explain that you are screening potential candidates.
Check Licenses, Education and Registrations
Unfortunately, too many consumers spend all their time looking for online reviews, many of which are of questionable value. It’s far too easy for savvy marketing departments of brokerage firms to game the system by adding bogus reviews to public forums. This deceptive, but fully legal practice, works two ways. A company posts glowing reviews of itself, authored by fictitious customers. Or, the organization posts highly negative reviews about its competitors, again written by fake sources.
The good news is that there is a relatively simple, effective way to check reputations. Look at licenses, educational background, and membership in investor-protection organization like CIPF and SIPC. They’re similar to the U.S. FDIC that protects banking clients from an entity’s failure. Note that even if your preferred agent is a member of one of these protective insurers, you won’t be protected against trading losses, just losses due to financial insolvency of the company.
Ask potential candidates about their education and be suspicious of anyone who is not forthcoming with names of schools and graduation years. Get license numbers and check local regulatory agencies for records of past wrongdoing. The financial services industry is highly regulated. In fact, most of the horrible cases of fraud you read about in the news could have been prevented if consumers had done their homework and watched for red flags like weak educational resumes, criminal records, and non-membership in official organizations.
For example, legit Canadian forex brokers will be associated with CIPF (Canadian Investor Protection Fund). That means if they work for a firm, it will be a member. If they act as stand-alone broker/dealers or investment advisors, then their own organization will be a member. It’s not easy to gain approval from CIPF or its U.S. counterpart, SIPC. Member firms might not be perfect, and anything can go wrong in the future, but at least your money is insured against loss through fraud and bankruptcy.
Ask for Personal References
If someone can’t give you at least three names of satisfied customers, say goodbye. Any professional, ethical financial agent in any niche of the industry should be able to provide at least a dozen names of individuals and businesses from a list of happy former clients.
Use Your Personal Network
Ask friends, coworkers, neighbors, and relatives who they rely upon when they need advice about where to park their money. Don’t just write down names and phone numbers, ask your acquaintance what kind of service they get from the person. Are they satisfied? Do they still use that financial advisor? How long have they been using them? Be as diligent as you’d be if you were looking for a brain surgeon. Remember, your hard-earned money is on the line, so be aggressive, serious, and thorough in your search.