Checking Your Financial Advisor’s Complaint History

How To Do It and Why It’s Critical That You Do

Have you ever checked your financial advisor’s history? If not, you definitely should. Before trusting your money to an investment professional, it is highly recommended that you check to see if any previous financial advisor complaints have been filed against them.

Unfortunately, many financial advisors and brokers have a history of complaints. According to a 2017 study published by researchers at University of Chicago’s Booth School of Business, approximately seven percent of all financial advisors have at least one complaint on their record. Of course, with some financial advisors, it is not merely one complaint.

When I represent investors in securities fraud cases, I frequently find that they are filing a claim against a financial advisor that has a history of misconduct. In some cases, the advisor may have even been terminated from a previous brokerage firm after suspected wrongdoing or they may have even been suspended by securities regulators.

The best way to deal with an unscrupulous financial advisor is to never get involved with them in the first place. So how do you check their complaint history?

3 Tools You Can Use to Check a Financial Advisor’s Complaint History

  1. The Financial Industry Regulatory Authority (FINRA)
BrokerCheck is a tool provided by FINRA that shows you employment history, certifications, licenses, and any violations for brokers and investment advisors.

The Financial Industry Regulatory Authority (FINRA) is a non-governmental self-regulatory body that oversees brokers and brokerage firms. Indeed, FINRA regulates the overwhelming majority of people who work in the securities industry in the United States. Altogether, the agency oversees more than 4,000 brokerage firms and over 620,000 individual securities representatives.

To help investors research financial advisors, FINRA offers a free tool called BrokerCheck. It is an easy-to-use database that allows investors to get immediate access to a financial advisor’s records. If your advisor is a FINRA member, they should be listed on BrokerCheck.

All licensed financial advisors receive a Central Registration Depository (CRD) number from FINRA. Using your broker’s CRD number or their full name, you can find their record through BrokerCheck.

What can investors actually find on BrokerCheck? To start, it will confirm that your financial advisor is properly registered to sell securities — as is required by federal securities law. Next, BrokerCheck will offer a snapshot of your financial advisor’s employment history within the industry along with the licenses that they hold.

Finally, BrokerCheck should provide an overview of what complaints have been filed and disciplinary actions have been taken (if any) against a financial advisor.

2. The Securities and Exchange Commission (SEC)

Registered Investment Advisers (RIAs) are required to register with the Securities and Exchange Commission (SEC). Notably, investment advisors owe a fiduciary duty to their clients. In other words, an RIA must always act in the best interests of the investor. This is in contrast to brokers, who must only comply with FINRA’s suitability rule.

If you want to look up information on an RIA, there is a useful tool available: the SEC also provides a free reference database for investors. It is called the Investment Adviser Public Disclosure (IADP) search feature. Using this tool, you can find out some additional information about an investment advisor.

3. State Securities Regulators

Finally, individual states also require financial advisors to register with their securities regulators in certain circumstances. You can ask your financial advisor which state licenses they currently hold. Using that information, you will know where to conduct some additional research to check for potential complaints.

For example, my law office is based in South Florida. If an investor wanted to verify that a Florida financial advisor was actually registered in the state, they could do so by using the search tool provided by the Florida Office of Financial Regulation.

Generally, state-based complaints and regulatory action will end up on BrokerCheck or on the IADP tool. For this reason, I would recommend that investors begin their research with BrokerCheck and IADP. However, there are some exceptions to this general rule, and there may also be some delayed updates.

As such, it is never a bad idea to run an additional search on a financial advisor. After all, you want to make sure that you are working with an investment professional that you can trust.

Investors Should Never Hesitate to Ask Questions of Their Financial Advisor

I encourage investors to ask questions of their financial advisor and their brokerage firm. In this realm, there is really no such thing as a ‘bad’ question.

Do you want to know more about your financial advisor’s history? Ask them.
Do you want a more in-depth explanation on why exactly their proposed investment strategy is actually the best option for you? Ask them.
Do you want to know if they are receiving any professional or financial benefits for making certain investment recommendations? Ask them.

You deserve comprehensive, straightforward answers. If a financial advisor is hesitant to answer your questions, that should raise some red flags.

Trust Your Instincts: Avoid Bad Financial Advisors

We are all familiar with the trope of the sleazy used car salesman. You have probably run into someone like that in your life — maybe even in the financial industry. In some cases, you may have a general uneasy feeling about a financial advisor, but you might not know exactly why you do not trust them. It is always better to be safe with your money.

If you have a bad feeling about a financial advisor, or if you feel as though they are being deceptive or misleading, you should probably walk away. There are a lot of reliable, skilled financial professionals available. Find someone who you can trust to handle your money with the competence, diligence, and honesty that you deserve.

Jeffrey R. Sonn is an experienced investment fraud attorney. He has litigated numerous cases and recovered many millions in compensation for investors. If you or your loved one was a victim of investment fraud or broker misconduct, please do not hesitate to contact our law firm for a free, fully confidential case evaluation. We are proud to represent investors nationwide.