Top 4 tips to keep your broker honest

2. Get it in writing – and verify statements

Mary Altaffer/AP/File
In this Sept. 15, 2008, file photo, Robin Radaetz holds a sign in front of the Lehman Brothers headquarters in New York. That day, Lehman Brothers filed for Chapter 11 protection in the biggest bankruptcy filing ever.

Brokerage firm account statements are notoriously complex and hard to decipher. But a review of the “activity” section of the account statement is important. If transactions are occurring that the client did not approve, the broker should be questioned immediately. If an unsatisfactory answer is provided, the account should be transferred.

Stockbrokers and financial advisers generally dislike soliciting an investment in writing. However, an investor should demand at least the communications related to the risks and costs of the investments take place in writing from the financial adviser in his own words. A thick financial prospectus is never enough as most clients don’t read them and they disclose the risks in ways most investors can’t understand. Financial professionals tend to be far less willing to misrepresent risks and omit important material about an investment in writing.

The Internet is the best tool available in trying to keep a financial advisor honest. If the broker solicits an investment in something like a non-traded REIT, perform your own due diligence on the Internet. See whether other investors are complaining about the investment. Are there dozens of lawsuits and class actions affiliated with the investment? If so, this should serve as a red flag.

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