NB is correct that you can check out an advisor's background at Brokercheck. This will help alert you to any potential warning signs about an advisor. But obviously, if an advisor is committing fraud, and has never been caught, nothing would show up. If they DID get caught, they would no longer be in practice.
One of the things I educate clients on is how to SPOT potential fraud going on with your accounts, and some ways to potentially detect it. Here is a brief list of things you should do: Madoff-Proof Your Portfolio
Always Review Your Brokerage Statements. This is an obvious one, but a simple way to detect if something fishy is going on in your account. Laziness is also a factor. Just do it. Scan your statements, compare the opening balance to the prior statement’s closing balance, and review all the activity and fees.
Get Online Access. I encourage clients to use online access AND receive paper statements. There have been many instances where advisors change the mailing address for client statements (by forging signatures) and then sending their own "fake" client statements. By using online access, you can double-check that your paper statements match what your account says online.
Call Your Brokerage Firm 800-number. This is another nice double-check, especially if you don't want online access (especially for people that are not tech-savvy or don't have access to a computer). Periodically (say, quarterly or twice a year), call the brokerage firm's Helpdesk (DON'T call your advior to ask, as this defeats the purpose of what you are trying to do) and ask to confirm balances as of the same period as your account statement.
Make Sure You Understand Your Investments. You don't need an MBA to do this. You jsut need to have an understanding of what you are ivnesting in. For 99.9% of the population, you should only be investing in publicly traded stocks, bonds, mutual funds, ETF's, CD's, annuities, etc. Be mindful of promises of returns that seem “too good to be true”. If you are not comfortable with the explanation you are receiving, use your CPA or a knowledgeable friend or family member as a sounding board.
Never, Ever, Ever Make Checks (or give cash) Payable Directly to Your Advisor. Even if you work with an independent advisor, checks should always be made payable to the custodian, bank, brokerage firm, or insurance company they operate through, NOT your advisor or their advisory firm. A big exception would be for professional services (ie. fee-only financial planning services) that your independent advisor performs for you (and generally be paid to your advisor’s advisory firm directly, not to your advisor personally). But this payment should be separate and distinct from funds that you are depositing into your accounts. Alternatively, checks for deposits into your bank and brokerage accounts can also be made payable to yourself.
That's awful - very sorry to hear this. A great starting place is the Financial Industry Regulatory Authority's website. It has a broker search portal which allows you to view information on firms and individual brokers including their employment history, violations, complaints, etc. go to brokercheck.finra.org to use it (free service).
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