Guest Post: How To Find Out If You Can Trust Your Broker

No one wants to hand their hard-earned money over to someone they can’t trust, and this is especially true when it comes to brokers. The only way you can do business with confidence is by knowing that your broker is trustworthy, ethical, and acts with your best interest in mind.

How can we be sure of this? We’ll walk you through all the best ways to determine if you can rely on your broker to treat your investments with care, or if your money would be safer in your mattress.

Broker or Joker? Here’s How to Tell First, let’s use some common sense. If your broker is on the level, they will be licensed, and they should be straightforward about proving their legitimacy.

If they aren’t, or if you can’t find it on your own, there’s a good reason for that: they’re not legitimate. Now that we’ve established that, here are a few things to look into:

1- Customer Reviews Many sites online offer reviews written by current and former customers that can help you get an idea of what it’s like to do business with the broker you’re interested in. These sites will usually give an average rating based on these reviews. Be careful not to base your opinion of a broker on just a handful of reviews though, as there are always people who will leave only angry, negative reviews no matter how great the service was.

You’ll want to make sure to be diligent in your research so that a few outliers don’t sour you on an otherwise great firm.

2- Regulators and Government Agencies If you want to start a brokerage in the USA and do business legally, you must first register with the SEC, the Securities and Exchange Commission. The UK has a similar agency called the FSA. The SEC keeps all records of all these registrations in a database called the CRD, or Central Registration Depository. The CRD also contains any filings or legal proceedings that they have been involved with.

If you’re looking into an individual investment advisor instead, look into the IAPD (Investment Advisor Public Disclosure) website instead of the CRD.

3- Word of Mouth If you’re getting into investing because of a friend or family member, or know someone who already uses a brokerage, then you already have a great resource available. They have no reason to lie to you about their experience, and chances are high you already trust them to begin with, making their advice tremendously valuable. They can help not only with choosing a broker, but can lend you their experience in all aspects of investing.

4- Straight from the Source There’s no way to form an accurate opinion of your broker until you talk to them face to face. Don’t forget that as the customer, you’re the prize, so make sure to get the information you need. Here are a few questions to get you started:

What’s in it for them? Do they take a commission on everything they do for you, or do they get referral fees?

What is communication like? Are they available when you need them? Are they proactive about outreach when your input is required? If they’re on the up and up, they won’t hesitate to answer any questions you have.

What do they specialize in? While diversification is great, everyone has a certain core set of securities that they’re best at. If your interests are in commodities and your broker primarily deals in stocks, it’s not going to be a good match. Test your potential broker out by asking questions specific to your needs. Just because someone is trustworthy doesn’t mean that they’re also good at their job.

In Conclusion You should never do business with a broker you can’t trust, but there are many new investors who fail to really check into who they’re working with.

Looking into the four areas above will help protect you and your financial future. You can’t buy happiness with money, but you can buy almost anything else, so be sure that what you’ve worked to earn stays with someone you can trust.

Andrew Altman