The Saudi Electricity Company issues accusations against the investor protection base. How to find a good advisor

Finding a broker or financial advisor you trust can, at times, seem like a daunting task.

This is especially true when investors see interesting stories of brokers Flee from the police in an underwater getaway or Faking their deaths in a plane crash. Then there are the notable crooks like Bernie Madoff, who was the mastermind of The biggest investment scam in history A Ponzi scheme that has cost tens of thousands of investors up to $65 billion.

There are, of course, less exciting but still notable events. Securities and Exchange Commission Accused A brokerage – Western International Securities Inc – and five of its brokers on Thursday with a new rule violation Aims to raise the level of investment advice protection to consumers.

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Brokers are alleged to have sold more than $13 million in junk, unrated bonds to retirees and others, even though the bonds are unsuitable for these investors due to a lack of liquidity and speculation, according to a Securities and Exchange Commission release. The brokerage did not respond to a request for comment.

It’s the first time the Securities and Exchange Commission (SEC) has sued for better regulation, which the federal agency released in 2019 and that companies had to comply with by June 2020. In general, the rule is generally required Brokers and companies put the client’s interests above their own financial or other interests when making an investment recommendation. They should share some of the reasoning behind the recommendation and disclose conflicts of interest.

There were 690,000 registered brokers and financial advisors in 2021, according to To the Financial Industry Regulatory Authority, or FINRA. Here are some tips for consumers to find one they can trust.

Watch out for red flags in organizer databases, and online searches

There are some surefire warning signs that the counselor you’re considering may not be a good choice.

Financial regulators have online databases that consumers can consult for basic information on specific individuals and companies. And the SEC has one, which is Investment Advisor Public Disclosure Website for financial advisors. FINRA Resources, BrokerCheckbrokers lists. (A person or a company may appear in both.)

First, verify that the person appears in either platform and is licensed or registered with a company.

This means they have met the minimum credentials and background to work in the industry, according to Andrew Stoltman, a Chicago-based attorney who represents consumers in fraud cases.

“If they aren’t, it’s a red flag,” Stoltman previously told CNBC. “If not, someone might be calling a cold from his mother’s basement.”

Prospective clients should also use the name of the advisor or broker on Google to see if there have been any news articles about past rumors or lawsuits. If so, that’s another bad sign. Regulatory databases will also list any disclosures, complaints, arbitrations, or settlements involving the individual.

Experts recommend checking for nefarious financial behavior such as poor sales practices, improper recommendations, and excessive or unauthorized trading.

Review account statements for other warning signs

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However, just because you don’t find these warning signs at first doesn’t mean that consumers should let their guard down. There are other signals to watch for after you decide to trust an advisor with your money.

Stoltman said that one of the lessons learned from the multibillion-dollar Madoff scam was ensuring that your money was deposited in a reputable third-party trustee such as Fidelity or Charles Schwab.

This makes it more difficult for the advisor to steal money or take advantage of the client, he said, because the assets are not kept at home and clients don’t make checks for the advisory firm.

Think of this as a firewall like two-factor authentication — the custodian company has certain procedures for withdrawing funds, which often involve contacting the customer, Stoltman said.

Customers can check their regular account statements for this information.

Moreover, losing money is not necessarily a red flag, especially if it occurs in a bear market.

But it could be a bad sign if an investor’s portfolio falls well below customary stock and bond indices, according to George Friedman, associate professor of law at Fordham University and a former FINRA official.

“At some point you start asking questions,” he told CNBC.

Excessive trading activity, as shown in the investor’s statement, is another telltale sign. This account failure results in fees and commissions for advisors but is financially detrimental to the client.

Proprietary investments — for example, owning a mutual fund managed by your brokerage firm — aren’t necessarily a sign of fraud, Friedman said, but it could be a sign that an advisor or firm is making money at your expense.

“I used to review the account statements every month,” he said. “If you see something funny or unusual, that’s a sign.”

Of course, investor data can be manipulated to hide such information.

Ask questions about investment recommendations

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Unsatisfactory or late responses to customer questions should prompt customers to escalate their case to the company’s compliance department.

Being asked to communicate outside of a consulting firm’s official channels, such as a company email, is also a major red flag.

Most importantly, understand your investments; Just put your money in with reputable asset and fund managers, the experts said. If you can’t understand it, it’s a bad sign, like an investment that sounds too good to be true.

Micah Hauptman, director of investor protection for the Consumers Federation of America, suggests that you ask your broker or advisor to check in writing what they recommend and why they haven’t recommended a simpler, less expensive option.

“If they can’t give a simple, specific, clear and concise answer to ‘why this is unlike anything else on the market, based on product cost and quality,’ it could raise some red flags,” said Hauptmann.

Find a credit advisor for a fee only

Brokers generally remain a low-cost option for consumer advisors who trade stocks and mutual funds irregularly and hold them for a long time.

Consumers who want ongoing, comprehensive advice and minimize exposure to conflicts of interest as much as possible should seek out a fee-only financial advisor, according to consumer advocates.

They can search for these advisors in networks like National Association of Personal Financial AdvisersAnd the network planning jarrettAnd the XY التخطيط grid planning And the Global Planners Alliance.

These advisors must have a core competency such as a certified financial planner, or CFP, hire financial planners and receive only a flat fee for their hourly service, monthly subscriptions or fees based on the assets they manage for clients, Ron Rhodes, CFP himself and Director of Personal Financial Planning Program at Western Kentucky University, for CNBC.

“This is the easiest way for a consumer to find someone who will definitely stand by their side,” Rhodes said.

He said consumers should meet with at least three different advisors after conducting research to ascertain a proper fit.