Investors Urged to Check 2 Databases as Study Links Advisor Misconduct to 5 Times Higher Repeat Risk
Updated
Updated · moneycrashers.com · Oct 18
Investors Urged to Check 2 Databases as Study Links Advisor Misconduct to 5 Times Higher Repeat Risk
1 articles · Updated · moneycrashers.com · Oct 18
Summary
FINRA’s BrokerCheck and the SEC’s adviser database can reveal an advisor’s licenses, past firms, customer complaints, regulatory actions and terminations in minutes before a first meeting.
Two searches matter because some advisors hold both broker and investment-adviser registrations, and the generic title “financial advisor” does not require any specific license or credential.
Patterns carry more weight than a single old complaint: a recent regulatory action, or disclosures at several firms, can signal higher risk than one small dispute settled without admitting wrongdoing.
A 2019 study of 1.2 million advisors found those with a misconduct record were five times as likely to offend again, and 44% of those who lost a job over it were back in the industry within a year.
For investment advisers, the SEC’s Form ADV Part 2A and Form CRS add plain-English detail on fees, conflicts and disciplinary history, giving consumers a broader check on who they hire.