Login | September 18, 2021

Hiring a financial professional? 20 minutes of homework

JULIE JASON
Discerning Investor

Published: September 14, 2021

Hate homework? How about 20 minutes of homework to check the background of the financial professional you want to hire? Here's how.
Start with BrokerCheck (brokercheck.finra.org), a free tool from FINRA (the Financial Industry Regulatory Authority). As you can guess from the name, FINRA regulates the brokerage industry.
On BrokerCheck, select the "individual" tab. Enter the person's name. If too many results come up (there are 29 pages of John Smiths), you can narrow the search by inserting the name of the firm he or she works for.
When the search result is displayed, the top part of the page will include the person's name, CRD number, the firm he or she works for and the firm's CRD number. The CRD (Central Registration Depository) number is a unique identifier issued by FINRA.
If you see a light-blue circle with the letter "B," that indicates a person is a "broker," someone who works for a broker-dealer. A dark-blue circle with an "IA" indicates the person works for an investment adviser. If both circles appear, it means the person works for a "dual registrant," a firm registered as both a broker-dealer and an investment adviser.
These terms define the rules the individual must live by when dealing with customers. (Two different sets of laws apply -- the subject of a future column.)
Next, you'll find four boxes. There are sections on "Years of Experience," "Licenses" and "Examinations," all of which provide important background details about the person when you click on each individual box.
From my perspective, perhaps the most important box is "Disclosures." If the box is gold, that means there have been "customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings and certain civil or criminal proceedings that they were a part of," according to the BrokerCheck site.
Clicking on the gold box will give you more details about the disclosures, including the date, type and disposition of each issue. For additional information, select the "Detailed Report" link above the company name on the right side of the page.
You also can find out information about the firm that employs the broker by selecting the "Firm" tab at the top. This time, you can enter the company's name or its CRD number, both found at the top right of the individual's report.
The results screen looks like the individual's screen, although only the first colored box, the one for disclosures, is identical. Again, that box is likely the one you will be most interested in.
For a firm, the "Disclosures" category shows a total number, with a breakdown by type (regulatory event, civil event, arbitration). Again, the "Detailed Report" link is available for additional information on each disclosure.
There is one other important piece of information to review: At the top of the page, by the firm's main address, is a blue button titled "Relationship Summary." Selecting that will take you to the firm's CRS (Customer or Client Relationship Summary), a key disclosure document required in 2020 by the U.S. Securities and Exchange Commission.
I am a supporter of the CRS -- if only more people were aware of it. The CRS is a two-page (four pages for dual registrants) document that allows someone to quickly compare and contrast firms. That includes a discussion of conflicts that are a part of the way the firm does business, which gives you a sense of the culture of the firm. Clearly, the CRS is worth your time when you are looking for a financial professional or reviewing your current one.
Yes, this involves doing 20 minutes of homework on your part. But it's your money at stake, and if someone is giving you recommendations about investments, isn't it a good idea to know who you are dealing with, and the company behind him or her? BrokerCheck and the CRS provide a good starting point.
On another note, as I mentioned in a previous column, I'm considering starting a "regular reader" email list to get your views on different topics through short surveys. If you are interested, write to me at readers@juliejason.com.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.
COPYRIGHT 2021 Julie Jason, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut St., Kansas City, MO 64106; 816-581-7500.


[Back]