By W. Devin Wolf, CFP® 19 June, 2014 Trusting your advisor because they are friendly and seem nice isn’t adequate to protect yourself from fraud. In reality most fraudulent advisors (and serial killers too for that matter) are charming individuals who have a knack for getting you to let your guard down.

Here are 3 ways to protect yourself:

Check their background:

Use FINRA’s BrokerCheck® or the SEC’s Investment Adviser Search to confirm their registration and record. If the adviser isn’t registered , has regulatory events, civil events, financial events, or customer disputes on their record this is a red flag.


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Use an Independent Custodian:

Having a reputable third party hold your money, develop statements, provide tax reporting and implement transactions adds oversight. It is important your advisor has a formal relationship with this custodian. There have been cases where the fraudulent advisor has clients set up “retail” accounts with a custodian and gains informal access from the client allowing the advisor to withdrawal money without the custodian being able to differentiate them from the client.


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Receive and review statements:

Unscrupulous advisors typically want to keep you in the dark by either not providing information or by providing false information. With the advent of electronic statement some advisors have been known to use their own email address on the accounts to intercept your statements. If you only receive statements directly from the advisor and not an independent third party you are also at risk of receiving phony information. Investment statements can be very difficult to read and understand. Be sure to review anything you don’t understand with your advisor. If something still seems fishy have an outside expert review the statement and confirm everything is on the up and up.

investment chart

Remember, no matter who you’re working with, your investments and your future should be the top priority. It’s essential that you and your adviser are both committed to protecting them. Fraudulent advisers might not be everywhere, but they can show up in unexpected places, and a little preparation and diligence can go along way in making sure you stay safe.

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W. Devin Wolf, CFP®
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