TOP DRAWER ARTICLE

Do You Know Your Broker?
by
HL Carpenter

Looking a stockbroker in the eye and asking, “Do you have my best interests at heart?” may be one way to find an advisor who will watch out for you. Of course, the person sitting behind that polished desk might just be good at telling you what you expect to hear.

Here’s a better question: “What stocks do you recommend?” And here’s the answer you want: “First, let’s talk about your financial situation, your risk profile and your goals.”

Why? Because that response can indicate a professional who’s thinking about more than simply generating commissions.

Of course, there are other, less subjective, ways to check out an advisor before handing over your financial assets. Here are four:

1. Brokers, advisers and firms are required by Federal and state security laws to be licensed or registered. Look up your advisor’s history at the Central Registration Depository (http://www.nasdr.com/3400.asp).

2. To understand professional designations and learn about filed complaints, check the National Association of Securities Dealers (http://www.nasdr.com/investors.asp).

3. For information about background and business experience, read another form brokerages are required to file: Form ADV. You can request this from your state securities regulator, the SEC, or your broker. You can also review the form on line at the Securities and Exchange Commission web site [Broken Link Removed].

4. Make sure the firm your broker works for is a member of the Securities Investor Protection Corporation (SIPC), which gives you limited protection if the brokerage firm becomes insolvent. You can learn more about the SIPC here: http://www.sec.gov/answers/sipc.htm.

You may be tempted to skip the research and trust your instincts by relying on the answers to a few questions. But remember, you’re making an important decision. You and your advisor will be working together – likely over a long period of time - to achieve the financial future you envision. Check the facts, and get to know your broker.

Originally published June 2004.

Last update: January 8, 2011