Before you hire a financial advisor, look them up on FINRA’s BrokerCheck and the SEC’s adviser database. Both are free, and in a few minutes you’ll see their licenses, past firms, customer complaints, regulatory actions, and any terminations. One old complaint means little. A disclosure at each of several recent firms means a lot.
The title on the business card won’t tell you any of that. FINRA, which supervises brokerage firms, lists “financial advisor” among the generic job titles people can use without holding any specific license or credential.
A friend’s referral won’t either. It tells you the advisor is likable. It doesn’t tell you whether a regulator has sanctioned them or a firm has fired them.
The regulators keep that record. Brokers, who trade securities for customers, must register with FINRA and show up on BrokerCheck. Investment advisers, paid for their advice, register with the SEC or a state and appear on the SEC’s Investment Adviser Public Disclosure site. An advisor can hold both registrations, so search the name on each.
A BrokerCheck report lists current licenses, up to 10 years of employment history, and disclosures: customer disputes, regulatory actions, terminations, and certain criminal and financial matters.
Read it for patterns. A customer complaint is an allegation. Some are still pending, and some were settled for business reasons with no admission of wrongdoing. One small dispute from years ago rarely tells you much.
A recent regulatory action tells you more. So does a job history with four firms in five years and a disclosure at each. A 2019 Journal of Political Economy study tracked 1.2 million advisors registered from 2005 to 2015. Those with a misconduct record were five times as likely as the average advisor to do it again. Of those who lost a job over it, 44% were back in the industry within a year.
For an investment adviser, open the firm’s Form ADV Part 2A on the same SEC site. It’s a plain-English brochure on services, fees, and conflicts of interest. Form CRS, a short relationship summary SEC-registered firms must give retail clients, covers the same ground and states whether the firm or its people have a disciplinary history.
Any advisor worth hiring expects clients to check. Run both searches before the first meeting, and if you already have an advisor, run them tonight.
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