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How to Determine If Your Investment Advisor is Properly Licensed

March 20, 2017

The governing bodies over Investment Advisors and their activities are FINRA & the SEC (Securities and Exchange Commission). To ensure that you are getting the proper care from your investment advisor, use these tips to ensure that they are properly licensed.

Read also: 5 Things to Keep in Mind When Hiring an Investment Advisor

Employment History

Review and understand the employment history of the advisor, industry exams passed and credentialing attained.

It is important to know the past experience that your investment advisor has had and check that they are up to par with the services you will be needing from them. Be sure to ask them for references and ask to see proof of all credentials before moving forward.

Disclosure Events

Review any "disclosure events" including instances of:

  • consumer complaints
  • sanctions
  • investigations
  • judgments

A 2016 academic study found that approximately 7% of advisors registered with FINRA have misconduct on their record.

If there are events on record, understand the nature of those events and how the event was resolved so that you are making an informed decision as to whether you want to proceed with securing the Investment Advisor's services.

Conduct a web-based search to find any other information about the investment advisor, including advisor terminations, actual scores on earned licensing exams, bankruptcy filings, and tax liens.

Some state securities regulators also offer reports that provide a fuller picture of an advisor's record, but the availability of these reports varies widely. PIABA offers a list of state agencies.

Ready to interview? Read about the 7 questions to ask when interviewing for an investment advisor!

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