We recently had a local financial advisor be arrested for stealing money, from older women no less. The advisor had clients make out their checks (purportedly to be invested in high interest Certificates of Deposit- that do not exist) to HIM.
I’m not sure what recourse the clients have aside from suing the advisor in a civil suit. His Custodian surely wasn’t aware of these transaction, nor was his compliance officer.
Too often people who are scammed are unaware of certain rules that apply in the financial services industry. To add insult to injury, many people come to trust their advisor and believe s/he would never do them harm.
I don’t want to get into a politcial debate, but it’s clear that, when individuals are not able to regulate themselves, a regulatory body can and perhaps should oversee their activities to protect the public. Congress has passed a bill in the hopes of doing just that. In the meantime, who can you trust?
I suggest getting referrals from family, friends, and other professionals before working with any advisor. You can also check the websites of certain regulatory bodies such as the SEC (Securities Exchange Commission, that oversees the activities of Registered Investment Advisors), FINRA (who oversees broker-dealers), the department of insurance in your state (that oversees licensed agents and insurance companies), and the Certified Financial Planner Board of Standards (that oversees CFP® professionals). You can determine if the person with which you plan to work is appropriately licensed/certified and if s/he has even been the subject of a disciplinary proceeding.
You need to take an active role in the stewarship of your resources; as burdensome as that may seem. Check all of your statements and have your other advisors review them from time to time. Unfortunately, you need to be vigilant. It also doesn’t hurt to challenge your advisor, even if you’re not sure what terms to use, if anything seems awry.
I believe you do need to extend trust when working with any professional for him/her to provide the most beneficial solutions to you, but you also need to balance this trust with a healthy dose of caution.
