On behalf of Girard Bengali, APC on Monday, May 6, 2019.
Finding a broker you can trust is not always easy. Even a financial advisor who comes highly recommended by a friend may not be a good fit for you. You want someone who will be straight with you and guide you in making decisions that will help you meet your goals, not just put commission money into the broker’s pocket.
Nevertheless, if you are looking for an advisor, it is probably because you don’t have all the answers. At some point, you know you will have to trust your broker. However, how do you know if your financial advisor is acting in your best interests or taking you for a ride?
Watch for the signs
It may be a red flag if your financial advisor intentionally keeps you in the dark about your accounts or encourages you to relinquish your decision-making rights by granting a power of attorney. If this happens, you may want to investigate further in case your broker is participating in any of the following unscrupulous actions at your expense:
- Embezzling the return from your trades
- Including his or her name along with yours on the title of your account to gain unrestricted access to your funds
- Churning, which means making an unreasonable number of trades to increase the amount of the broker’s commission
- Involving you in a scam, such as a Ponzi scheme
A Ponzi scheme is a form of fraud that pays initial investors a large return from the funds added by subsequent investors. A broker or advisor who offers you quick, high returns for low risk may be presenting a Ponzi scheme or similar type of fraud. Often, these scams target certain groups, such as people affiliated with a certain community, senior citizens, church members or even family.
One important step to take to avoid falling into the traps of fraudulent investments is to carefully investigate any broker or advisor you intend to work with. An advisor who is registered with the SEC must uphold a high standard of ethics, so a good place to start is by checking the certification of your advisor. A little research may also reveal any ethical violations in your broker’s background.
If you find yourself a victim of an unscrupulous broker, you do not have to suffer in silence. Unfortunately, misconduct among brokers is not uncommon, but there are California legal professionals who are passionate about protecting the rights of victims of fraud, negligence and the unethical behavior of a financial advisor.