You may be making a false assumption if you believe that broker and other investment professional illicit conduct and antics ceased with the previous Great Recession.
But even after Bernie Madoff and Jordan Belfort were jailed for their financial crimes, misconduct by brokers and others remains unchecked and unnoticed in the financial world today.
In Massachusetts, the Securities and Exchange Commission (SEC) brought allegations of fraud against a registered investment advising business and its owner. The charges were eventually dismissed. For example, the agency said that Family Endowment Partners and its owner Lee Dana Weiss steered customers toward particular investment opportunities while concealing the fact that Weiss would keep half of the earnings. SEC charges claim that Weiss received payments from firms in which he had financial interests and pushed customers to invest $40 million in securities.
What To Consider
Do not do business with any broker or financial adviser who reaches you by phone or email without your permission. Investing seminars that provide free lunches or other goodies are designed to lure you in and encourage you to relax your guard. A 2013 FINRA Investor Education Foundation study found that 64% of individuals 40 and older have been invited to a “free lunch” lecture.
As the SEC warns, you should be extra cautious when dealing with cold callers that employ high-pressure sales methods, promote chances that come along just once in a lifetime, or refuse to provide written information on an investment. There are several methods to find whether a certain broker, for example, in the Forex market, is legit and trustworthy or not.
Usually, investors and traders use a technique of Forex broker comparison, in order to not only find the best-regulated forex broker, but also the broker which allows them to get sophisticated services. The individuals who will provide you with advice, goods, and services need to be kind and approachable, regardless of whether you’re searching for a broker or a financial advisor. Ask a lot of questions about the products and services offered by the firm, as well as about the company’s past experience working with customers who share your requirements.
Also, learn about your working connection with the expert. In accordance with the so-called fiduciary standard, financial advisors are required to prioritize the interests of their customers above their own when making investment recommendations. If the professional’s suggestions are not in line with the client’s interests, the criterion is referred to as a suitability standard. There is no fiduciary standard required for brokers, but investment advisers are required to observe it at all times; nonetheless, you may be lucky enough to locate a broker-dealer that will.
Never deal with someone who is hesitant to offer you complete and accurate information since you can never obtain truthful answers from them. Request information about prices, charges, and commissions. Both components of Form ADV should be provided by your registered investment advisers.
It is also worth mentioning that you should be wary of brokers that guarantee you a large sum of money if you win. You should constantly keep in mind that when you start trading in financial markets, there is no assurance that you will make a lot of money. The fundamental reason for this is because financial markets are highly volatile, and asset values fluctuate based on a variety of variables. Furthermore, be careful with brokers that attempt to entice their consumers with large incentives.
When looking for a financial expert, a basic online search using the broker’s name and the name of the business is a good place to start. Client comments on online forums, background information, and other factors may come out as a result of fresh disclosures or media publications about suspected misbehavior or disciplinary proceedings. To give you an example, if you search for “Lee Dana Weiss,” you’ll get over a million hits, including the press release regarding the SEC lawsuit against him and his business.
Next, look up the regulatory authorities’ names on the internet. Federal and state securities authorities mandate the registration of financial professionals and their businesses. In addition, the public has access to this registration information and details of the sanctions applied to persons or companies that have violated it. It’s important to remember that different agencies may offer comparable information if their enforcement jurisdictions overlap. Make any investment checks payable to the SIPC member business, not the individual broker. This will protect your money.
To put it another way, putting your money on autopilot is a terrible idea. You may catch misconduct or problems early on by carefully checking your statements, whether you get them online or on paper. Accepting promises that you don’t comprehend is a bad idea. If you’re still not getting answers, go up the chain of command. Never be concerned that you’ll come out as oblivious or obnoxious.
Brokers and financial gurus are still misbehaving despite the fact that the Great Recession is over and done with. So, do your homework before trusting a financial expert with your money, and then keep a tight eye on your accounts. However, don’t be afraid to withdraw your money if your returns become unsatisfactory or you have other problems that the adviser fails to address promptly and correctly.