Top of Mind


Is Your Adviser Who They Say They Are? How to Check an Adviser’s Background

The Certified Financial Planners (CFP) Board made news recently when their public background database of CFPs came under criticism in a Wall Street Journal (WSJ) article. However, that same WSJ report also highlighted what I believe to be a hidden gem for retirement plan participants and plan sponsors - FINRA’s BrokerCheck database.

By entering an individual advisor or firm’s name, a user can immediately determine whether he/she/it is a Registered Investment Adviser (a higher fiduciary standard), a Broker-Dealer (lower suitably standard), or both. Colored circles, labeled “IA” for Investment Adviser) and “B” for Brokerage Firm, immediately and easily identify the firms and individuals. And then, by clicking on that entity’s Investment Adviser and Broker Dealer box (or boxes, for firms with more than one register name, active or inactive), users gain access to a whole host of easily accessible information.

For Investment Advisers, users are forwarded to the Securities and Exchange Commission’s (SEC) webpage, as IAs are regulated by the SEC). Once there, users are a click away from the adviser’s Form ADV and Part 2 Brochure, both of which provide important information, such as disciplinary action, assets under management, number of employees/advisers, number of clients, types of clients (e.g., individuals, retirement plans, etc.), whether the adviser provides financial planning services, and other business activities. The information is arranged similarly for individuals, except that a “Detailed Report” link provides access to a PDF which includes the individual’s current employer, last 10 years of employment history, other business activities, any passed exams or professional designations, whether he/she is currently suspended within any jurisdiction, and whether the individual has any customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings and certain civil or criminal proceedings to which he/she was a party.

For Broker-Dealers, it is even less work to find the info you want. After clicking on a “B” box, users are immediately taken to a page where there is a box titled “Disclosures.” If the number in that box is “0,” the firm or individual has had no customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings, or civil or criminal proceedings against them that were required to be disclosed in their FINRA file. If there is a number in that box, they have had such disclosures, and users can quickly scroll down and click on the “detailed report” link which will provide details in a complete BrokerCheck report. For firms, the BrokerCheck report also includes such tidbits as to whether the firm is currently under suspension with any regulator, the types of business the firm conducts, arrangements it has with other broker-dealers and firms, and affiliates of the firm. For individuals, it provides the number of years of experience with their current firm and with prior broker dealers, number and type of exams passed, as well as the number and type of state licenses.

I would strongly encourage plan sponsors and/or retirement plan participants to use the BrokerCheck database to screen any advisers they are currently using, or any advisers that they may potentially use in the future.

Do you have a retirement plan issue that you would like for me to feature in an upcoming Top of Mind? Let me know on LinkedIn, Twitter, or at info@cammackretirement.com!

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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