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Financial Planners Information Online - How to Check Broker and Financial Advisers Background - What to Look For When Choosing One

May 29th 2006

Financial Planners Information Online - How to Check Broker and Financial Advisers Background - What to Look For When Choosing One


There are Federal and state laws that require both brokers and investment advisers and their firms to be licensed or registered.  This provides important data for those seeking information about specific advisors.  According to the Securities and Exchange Commission (SEC), “The good news is that this information is easy to get, and one phone call or web search may save you from sending your money to a con artist, a bad financial professional, or disreputable firm.”

It is recommended that before you invest or pay for a financial planner, make sure they are licensed.  Also check to see if their firm has had “run-ins” with regulators or other investors.  The SEC warns that if you do business with an unlicensed company that later goes out of business; there may be no way for you to recover your money.  If the firm is licensed and insured you may stand a better chance.


There is a central database called the Central Registration Depository (or "CRD") which contains information about most brokers, and the firms they work for.  This information will include serious complaints from investors, the education and background of the brokers and where they’ve worked before their current job. 

According to the SEC, all you need to enter is the NASD to provide you with information from the CRD. Your state securities regulator may provide more information from the CRD than NASD, especially when it comes to investor complaints, so you may want to check with them first.  The SEC also provides a BrokerCheck hotline number (800) 289-9999.


Typically, people that get paid for giving advice about investing in securities have to be registered with either the SEC or the state securities agency where they have their principal place of business.  Those advisors that manage $25 million or more must register with the SEC.  Even the employees that work for advisor companies must be registered or registered. 

The SEC says that potential customers should read their registration forms.  These are called the “Form ADV.”  This form is composed of two parts.  Part one has information about the adviser's business and whether they've had problems with regulators or clients. Part two outlines the adviser's services, fees, and strategies.


You can view these documents online at the Investment Adviser Public Disclosure (IAPD) website.  Although the data only includes the adviser firms that register electronically using the Investment Adviser Registration Depository, it is still worth a try.  Otherwise you can get the forms from the state licensing agency or the SEC for an minimal cost. 

Office of Public Reference
Room 1580
100 F Street, NE
Washington, D.C. 20549-0102
phone: (202) 551-8090
fax: (202) 777-1027
e-mail: publicinfo@sec.gov

There is a Securities Investor Protection Corporation (SIPC), which provides limited customer protection.  If a brokerage firm and its clearing firm are members of the if a brokerage firm becomes insolvent — although it does not insure against losses attributable to a decline in the market value of your securities – this may help you recover funds if there is a bankruptcy. 

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Dan Wilson
Best Syndication

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Important:  The material on Best Syndication is for informational purposes only and is not meant to be advice. You should always seek professional advice before making financial decisions. 
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