How to check a financial advisor's public disciplinary history

Sean wants you to know how to check up on your potential financial advisor — because you need to know as much as possible about the individual — using a tool called BrokerCheck.

Transcript

Sean 0:02

Hi, this is Sean. And as you know, on how to find a financial advisor, we try to give you the tools you might need to do a little homework either in starting from scratch to find a new advisor or to kind of do some homework on your current advisor or prospective advisor. Or just make sure you know the most information you can to make you feel comfortable about your choice. And one tool that can be a great resource is something called broker check. So this video will talk about the basics of how to use that tool. So there's a lot of information publicly available online, like many things, but knowing how to use it and what it's telling you and not telling you is an important uh piece of the puzzle. So um this will be fairly short about the basics of how to use the tool. And then if you have questions, uh put them in the comments or send me an email. Or I will also there also be other videos that you can you can go to for more in-depth if you're looking for that. So I will take you straight to a Google, Google uh search. So first of all, this this tool is called broker check. Um but as you know for other videos and any research you might have done, uh advisor and broker, unfortunately, are used somewhat interchangeably. So this tool is if I use them, uh I will usually use the term advisor, including in this conversation, but uh be advised that the uh the broker check is talking about both brokerage and advisory licenses, which we'll touch on. So uh you can you can find it through a couple different ways. Just search in broker check or FINRA broker check to get you there. So what you're looking for is just brokercheck.finra, which is a financial industry regulation authority. Um, so this is tools been around for quite a while, and I've used it off and on for many years. So you see, I've already got my name sort of pre-populated here. So I'm gonna use my uh personal uh information here, uh, not because you need to know a lot about me, but because I'm obviously don't not too worried about that, the privacy of that info that's on here. And I'm intimately familiar with uh my details, and I can give you some things that might um look funny at first glance. That um, you know, if you don't know the industry or the history of certain things, it would be hard to know why they exist. So the first thing is even though my name is not extremely common, still had 77 results just plugging in my name. So obviously that is me. Um then any kind of combination of my name or similar versions of my name pop up. You can also put the firm if you know a particular advisor uh that you're trying to research, which obviously you are, um, the more detailed the better if they have a more common name. So if you put in um my licenses, some of them are held by LPL Financial right now. So that would narrow it down quite a bit. And you can also do former firms. So this is a firm I worked with years ago. Um, so that you can narrow it down quite a bit. But we'll go, you know, if you're trying to find the right person, make sure you have the right person. Um, and you can do that by the firms they've worked for now, uh they work for at the moment, or or previous firms. So we'll click on. So there's it's just interesting that there's that many results with uh not the rarest name, but not the most common either. So we'll hit more details. So there's two ways you can use this. One is this summary here, uh, and then the second way is through um going to a deep more detailed report. Uh, most of the information that you need is going to be found just on the online version. And then you can click on this detailed report if you want to dig in. And I'll show you a couple of things that do not show up on this main uh online version that you would, or the the uh listing versus the detailed report. So this just shows uh where my office is located. These two terms here: broker, regulated by FINRA, regulated by FINRA, and investment advisor, which is regulated by the the Securities and Exchange Commission or the SEC. They're different licenses. I'm not gonna get into the to the details of how to what that means. A lot of advisors that you might go work for are gonna have both of those licenses or have had one at one time or another. There is a more and more common path into the profession that does not involve getting a brokerage license. So there's there's nothing wrong with not having either. Um, most advisors that I would probably want to steer people to would be have the investment advisor licenses. In other words, if they only had one, I tend to, for various reasons, would want to tilt towards someone that only has this IA investment advisor, but a lot of them are gonna have both, and there's nothing wrong with that. So this shows the firm how long someone's been licensed. Um, again, there's various ways they get various roles and responsibilities they might have having those licenses. So it, you know, not all experiences are created equal, but so I I've been doing this, been licensed for just over 20 years, and you'll see with the specific dates here in a minute. Um, no disclosures, which again, I'm not that may or may not be a big deal. Some people will have uh one, and it could be something silly, which I'll probably cover in other videos how to determine that, and and we'll see where to look for that at least. Um someone has seven disclosures and there's lots of customer complaints, client complaints, you'll be able to tell that from this report. Uh luckily, I've been in great good situations and had good great clients to work with. So um try to be pretty straightforward. So many advisors won't have to have any disclosures. That's that's a good sign, but it's not uh it doesn't make me a hero by any stretch. There's plenty of advisors that have no disclosure items. Um six firms, I'll touch on that in a second. Really, it's only been three, but that's that's an example of how how to interpret this data is kind of important. Then seven different licensing exams, and I have a lot of state license, which is neither here nor there. So this shows a timeline of uh this is a little busy to me, so I'll go down here and show you the um the history. So these are the firms that I've had licenses with or do now. So uh I'm sorry, these are the ones that I have now. So I I have a I have part ownership in this advisor resource council, which is the investment advisory firm. So one place holds my advisory licenses, uh, and one place, this this very large business company owns, holds my brokerage licenses. Uh now, because I'm it's me even because I'm knowledgeable in this, I know this this company, um, you don't have an employee relationship. So that would help tell me if I couldn't tell from a website or other uh conversations. If you're an employee, that's not really gonna show up here. In fact, the language says makes it sound like you're an employee, even if you're completely independent. But because of the way these licenses are uh determined, you in this case they do hold a license. So they have some compliance oversight responsibility. So I've they've they've had that license for um quite a while. And then this firm, my partners and I started a few years after uh I had moved to have an independent business supported by LPL. So that that could that can tell you something, but unless you know a lot about the the profession or the industry, it's hard to know what it means, but you get the idea there. So then the previous companies that have held licenses. So this is particularly confusing because um LPL also held my advisory uh advisory licenses until we started our own advisory firm. Again, we still hold our accounts with LPL. So again, that's the nuance, so that can be uh somewhat confusing. Um, if you have questions about a specific person that you're researching and trying to make sense of it, email me or call me. I'm happy to try to answer um the questions as I can. Um, but one thing that's interesting here is I've been with LPL since 2009. Well, for the four years before that, I was affiliated with Morgan Stanley, a fairly large firm that a lot of people know that name. But so so those four years, you see one, two, three, four, five, six entries here for my time at Morgan Stanley. There's two main reasons. One, um, Morgan Stanley had two different um basically entities that that both uh held investment licenses, and they can they combined those in 2007. So I got there in 2005. In 2007, they combined them. So they switched my license from again, we had the brokerage and advisory side as well. So they switched it from this identification number to this one. So nothing changed in my life except the legal disclaimer stuff. And then uh shortly after that, um, so that was 2007. Then 2009, Morgan Stanley basically bought Smith Barney. So Smith Barney was an investment advisory brokerage operation owned by Citigroup at the time. Uh, in the height of the financial crisis, Citigroup had some trouble. So um, Morgan Stanley did as well, but uh less than Citigroup, uh, because Citigroup was more of a traditional bank and exposed to that uh crisis. Morgan Stanley was an investment bank, also exposed, but was in a little better position and focused on the wealth management financial advisor space. So, anyways, they bought Smith Martin. So, long story short, these six entries are four years at one place. Um, so that that gives you an example of determining what this tells you can be limited unless you have that kind of background about the individual or the firms involved. And then I spent three years at Edward Jones. So um that shows kind of the career history for an advisor. And then you can also see um when someone passed certain um licenses. So if you look back here, the earliest licenses for me were when I very first started in the profession in 2002. I took these two licensing tests two days apart. So those are a brokerage license, which I didn't really understand the nuance at the time because I was I didn't know what I didn't know. But those brokerage licenses technically are a security salesperson license. Um, a lot of people that end up essentially giving advice, but from a legal standpoint, it's it's not advice. Uh you're you're getting paid for trip for transactions, but again, that's for another video. Um, then this investment advisory license I took in 2006. So that was my first entree into the advisory licensing, and that was when I was at Morgan Stanley. So uh then I have a couple supervisory um licenses that I got in my time at Morgan Stanley because they had no one else to be in charge of a small office. So they had need someone to sign off on things. And um I think I was tagged as it because um I was the youngest one there who the other advisors wanted to spend time on their practice and not doing supervisory tests and stuff. So then a couple other smaller or less important to me at least exams, but you can see you know the different licenses that might be want to have not critical, um, but there's usually you know a story behind that if there's a big gap, or you know, you can for each specific case, it might might or may not tell you anything useful in your search and research. Uh the licenses, this just in in the brokerage world, you have to have a separate state license for each place you have a client or a customer. Uh, in my case, this is because I help run a network of independent advisors, help that we support other advisors. So I have clients in some of these states, but not anywhere near all of them. So I'm essentially licensed, I think, in every state. Um, if you come across someone who has that, that's probably they either have a very, very large client base, or like in my case, it's um they're performing other duties besides just being an advisor. So most people, most advisors, after a period of time, people move, people uh get referred to someone uh that's out of state, friends, family, etc. So you're gonna have various licenses. So that gives you a high-level view of what uh this broker check report can tell you about someone. Um, if there's disclosures, you you could see them on here, and it'll tell you some of them might be I stole a barber's chair as a fraternity prank in college, to I got a ticket when I was in high school, to you know, uh me and my immature friends in in high school knocked over a mailbox and got caught. You know, there could be the fairly long ago, somewhat minor infractions to the most egregious fraud and other uh scary things that happened. So you can you you can uh maybe I'll do some case studies on those so you can get a sense of what's what's what. Um the one thing on here that that you don't get into, you don't see the details. You click on this detailed report, and a a lot of the same information will come up. Uh so you'll see you know a lot of the basics here, same data, right? And just in a slightly different format. And then you also see at the end of this report, um, if you've been in, if an advisor has been in the profession less than 10 years, you will get some insight onto what they did before they were an advisor. So in my case, that doesn't apply. But for anyone with 10 years or less of experience, you would see here, you'd be able to see a list of their prior employment. So if someone is in their mid-20s, this might go back and show their high school or even middle school years if they're young enough, right? So that would give you a sense of um age and sort of stick where they are in life, um, which again may be great if you want staff, if you like the idea, or you can tell from talking to them that someone that's newer in their career and has a long um runway to be helping you if you're looking for that very long-term potential relationship. Uh, then the other thing, so this this can be helpful in in a newer advisor's uh background. You you'll see uh job history. Then here, outside business activities or other business activities. For me, there's nothing particularly interesting. Um, these are the kind of the brand names that I've used. Um, I also did get a real estate license a few years ago, so that's on here. Um so this might tell you if someone's involved in um charitable activities or they're on boards of things, they have they have another business doing something else. Uh, this is required because the firms that that that hold our licenses want to know if we're involved in anything else so that um they can be aware of any potential conflict of interest. So that could be useful. Um, at least give a little background. A lot of advisors, there'll be nothing there. Um, so hopefully that gives you a high-level sense of what broker check can do, what information that might show. Again, uh I have other case studies that you should be able to find on the channel uh or will be produced if if you if they're not there yet. So let me know if you have any questions or if I could be of help. Um as I'm recording this, I'm willing to do sort of a one-on-one review, uh, give you some feedback as I'm sort of building the uh the remarket research to see what people might be interested as they uh try to figure out what they want to know about a potential advisor and to feel comfortable. Um my goal is not to bring in new clients as I do research of other uh videos and resources on how to find an advisor. It's natural that a lot of those content is going to be focused on highlighting what might be good about that particular advisor. For example, um, if someone says you should probably find a CFP and a certified financial planner designation, most people that recommend that are going to have that designation. And it could be that they got the designation because they believe in it, but there is a slight little conflict of interest if um I make the list of how to find a financial advisor and I give you 22 items, and lo and behold, I fit all 22. So my intent is not to really bring in new clients. My intent is to talk shop. I love talking about the profession. There's a lot of great advisors out there, and I know from my experience in other domains in life, it's very, very difficult sometimes to uh find the right professional and know what I should care about, what I should not care about in terms of what they do and don't do, and how to ask the right questions. So um I'm happy to help uh in any way I can. So uh you can call me at 469 893 0067 or email me at kernan at hey.com or just uh comment on the video. Thanks a lot, and we'll see you next time.