How To Do A Background Check On Your Financial Advisor
In today’s day and age of the internet, you can find just about anything in no time. Looking for a restaurant nearby? Go to the internet. Need a place to get a haircut? Go to the internet. Looking for background information on a financial advisor? Yep, go to the internet.
It amazes me how we found things before we had the internet. I guess we just asked for referrals from our friends, looked things up in the phone book or drove around until we found out what we were looking for…the indignity.
Now we have all of that and more right inside our pockets. It’s pretty amazing how technology has completely revamped the way we interact and search for help when we need something.
And guess what, the same can be said when looking for a new financial advisor or trying to find out more information on the one you're currently working with. Just like everything else in our lives, the first place we turn to dig up more information most likely will be the internet.
With that being the case, I want to take you through all of the various avenues available to find out more information on the financial advisor you’re currently working with or one you’re thinking about having invested your hard earned savings.
As you can imagine, there should be plenty of information on advisors who are actively growing their business…and if there isn’t, that’s probably cause for concern as well.
Search Engines
I could have just put Google, but I felt like I’d be discriminating against all of the other search engines. So, whatever search engine tickles your fancy – or maybe a few do – these are always a good place to go.
Simply type in their name and see what happens. If nothing pops up or they have a “common” name, then you may want to add their city or the firm in which they work or previously worked for (you can find that information by looking at LinkedIn, FINRA Broker Check or SEC Broker Check – we’ll talk more about these later).
Hopefully, at least a few things come up in which you can dig into a little bit more. Their profile page on their website or their Linkedin profile will most likely be the top two results.
If neither of these popup (or nothing pops up), then you can either choose to be concerned because they don’t have much of a web presence or just take it as they’re “old school” and like to stay off the grid – either way, it doesn’t seem like the best marketing method.
While you’ll probably run across their LinkedIn profile when searching for their name on Google, I didn’t want to leave it out as this is probably the first place I would recommend checking.
A financial advisor's LinkedIn profile should tell you a lot about their personality and who they are. If they don’t even have a LinkedIn profile, then I’d be a little concerned and start digging deeper.
However, if they do (and they should), you can see where they’ve worked in the past along with other details they have included. Again, you should be able to get an idea of the advisor’s personality, who they work with and what they specialize in from their profile.
If it’s pretty bland and you can tell they didn’t put much effort into it, then, again, that could be cause for concern. A financial planner should take the time to update their profile regularly, and their personality should shine through.
If it doesn’t, and they don’t offer much information at all, then it might be a sign of lack of motivation since LinkedIn is the #1 search engine prospective clients use to find out more about an advisor. I can assure you it should tell you a lot about who they are and if it seems like they would be a good fit.
Also, as mentioned previously, you’ll be able to find out other firms they’ve worked for in the past along with any common connections you might have with them. If you really want to do your due diligence, then you can call the other firms and/or reach out to your common connections to find out more information.
FINRA and SEC Background Check
The Finra Broker Check and SEC Broker Check sites are kind of the “official” background check sites for financial advisors. FINRA and the SEC are the overarching bodies that keep track of all background information as well as disciplinary information for all of us.
If they’ve ever been in trouble before, it will show up here. Obviously, these are must check sites to find out all of the nitty-gritty details they didn’t feel like sharing in their LinkedIn profile.
You will find every place they’ve worked in the industry, examinations they’ve passed, disclosures, disciplinary actions, and state licenses.
However, if they are what’s called an Investment Advisor (like I am, which means I’m an independent fiduciary), then you will need to go to the SEC site, where you’ll be able to find out about their history as an Investment Advisor (the FINRA site will link to the SEC site).
If you take a look at my history on the FINRA website, you can see there is a blank period from 2007 – 2013 and then from 2014 to present where I was and still am registered as an Investment Advisor only. This just means I am registered with a Registered Investment Advisor (NextGen Wealth) and not associated with a broker-dealer.
The biggest difference between an Investment Advisor and being registered with a broker-dealer is that an Investment Advisor is always a fiduciary. We monitor our own compliance, and we don’t sell commissionable investment products.
I could keep getting into the weeds, but I’ll stop there. Just know that these two sites are vital to your search process.
As a side note, you should be able to access the financial advisor's ADV through either of these sites (or their own website) which will provide even more information.
Do They Have Any Reviews?
If you’re anything like me, I rely a lot on reviews posted on the internet before making decisions. From buying something on Amazon to finding a good roofer, I would say reviews by far make up the majority of buying decisions today.
While most financial planners won’t have many reviews online, some will, your next best option is to see if you can find any references to individuals who already work with them.
I would start by looking at common connections on LinkedIn and reaching out to them. If that turns out unsuccessful, then you can ask the advisor for references, but that’s only going to help so much.
Let’s be honest; it’s not like they’re going to refer you to their unhappy clients (I wouldn’t). They’re going to refer you to those clients who will sing their praises.
However, if you can come up with some good questions, you might find out more than you think from their references.
Someday, there will be more access to personal reviews of financial advisors, but for now, your best bet is to check if they have any reviews on Google, Facebook, or Yelp, and then ask for references if that comes up blank.
Are They A Fiduciary?
This certainly isn’t the end all be all, but if they are a true fiduciary, then they have pledged an oath to put your interests above all others.
So how do you know if they’re a true fiduciary? If they have an affiliation with a broker-dealer, it probably means they’re not a true fiduciary. They might have some fiduciary responsibilities, but they might also be able to take that hat off if it serves them.
Investment Advisors, who are registered with a Registered Investment Advisor, are true fiduciaries. They must put their clients' interest above all others.
Also, if they are a Certified Financial Planner® - which I would put at the top of my list of priorities – you know that they’re a fiduciary as well.
However, even if they are a true fiduciary, I’m not saying issues still can’t come up… and the same can be said for those advisors associated with broker-dealers… it doesn’t mean they’re bad or not trustworthy.
If it were me, my number one priority would be to make sure they are a Certified Financial Planner®. After you’ve narrowed it down to that, then I would start looking at the other criteria I’ve listed in the sections within.
Do They Actually Have A Financial Planning Process?
This is super important and one that many people overlook. You don’t want to get stuck with someone who only cares about investments and doesn’t bother to look at any other aspects of your financial life.
You want to find out exactly what their financial planning process is, what the steps are, and if it covers all facets of your personal financial life. This is where the true value lies in working with a real financial planner.
The easiest way to see their process is by going to their website. They should have some kind of dedicated page, and it shouldn’t look like it was just copied and pasted or look the exact same as every other advisor.
It should be unique, stand out, and really talk to you and your situation.
Review Their Website
Finally, you need to review their website. How does it look? If it looks like it was designed in the 90’s, then it might reveal something about their business.
It should look fresh, up to date, and easily be accessible from your mobile phone. It should clearly express their value proposition, what it is they stand for, and how they help their clients.
It definitely shouldn’t have an older couple holding hands on the beach, a tree with roots or a compass… even though that probably covers at least 50% of firms out there.
It should be personable, relatable, and have their financial planning process clearly drawn out.
Also, and very importantly, it should clearly explain exactly what they charge. Nothing should be hidden behind the curtain. In today’s day and age of transparency, if they don’t clearly state their fees on their website, then it tells me they’re not comfortable putting it out there.
So there you have it. My seven criteria for doing a thorough examination of a financial advisor you’re vetting or one you’re already working with. If you can check yes on all of these, then you’ve definitely found one of the good ones who will always put you and your family’s interests above all others.
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