Background Check Potential Advisors

Over time, many financial counselors have disagreements with clients, often no more than simple misunderstandings. In today's litigious society, that means there are a lot of good advisors out there with one or two black marks on their record.

Before your first sit-down, you want to arm yourself with information about those incidents. You can do this either when you are first sorting out advisors -- doing the work on your short list of candidates before the initial interviews -- or immediately after your phone conversation, when you have decided to set up an interview.

If the advisor is sending you any paperwork to prepare you for the meeting, ask for any regulatory or background information, such as a Form ADV for financial planners.

You want the background data in hand before your initial interview so you can ask about any black marks or red flags and get an explanation of what happened and how problems were resolved.
Clients may have had unrealistic expectations; the advisor may have created that kind of problem. Whatever the situation is, you want the advisor's side of the story, and you want to make sure you can avoid a similar fate to the person filing the complaint.

If the advisor balks at owning up to the past, or the answers sound hollow, you won't be hiring him or her. Far better to confront the person with what you know in the first meeting than having to call back or arrange for a second meeting before you hire them.

If an advisor's disciplinary or regulatory history comes back with enough black marks to scare you, cancel the initial interview immediately.
By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2016. Content published with author's permission.

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