How to Find an Honest Stockbroker
Most stockbrokers are honest, but it's hard to tell if you can trust any stranger with your investment. Here are some steps to determine if a broker has the integrity to handle you life savings.
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Things You'll Need
- Personal referrals
- Telephone
- Computer with Internet connection
- NASD BrokerCheck database
- Records from the local clerk of the court's office
Instructions
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Get a reference from a satisfied customer. Ask him or her if this broker returns calls quickly, only pushes company products like mutual funds or recommended stocks and takes time to explain the advantages of various financial plans.
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Ask the broker for additional references and check them. You want a stockbroker with plenty of happy clients. If there are none willing to go on record about this guy, it could mean that he doesn't have any clients or that he has "churned and burned" them with bad investments.
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Check the stockbroker's record with the National Association of Securities Dealers (NASD). Any stockbroker or brokerage firm registered to trade securities within the last two years will have a report available online with the BrokerCheck system. If you have any questions about what you see, call the NASD at (800) 289-9999 Monday through Friday from 8 a.m. to 8 p.m. Eastern time.
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Go over local databases for criminal records through your clerk of the court's office. That underage drinking charge, while interesting, isn't what you are looking for. See if he or she has been arrested or convicted for anything regarding financial issues, breach of trust or theft that may not have made it into the NASD database.
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Review the broker's record (and his or her firm's) in civil court through your local clerk of the courts office. Pay close attention to any cash settlements that the broker or the firm may have paid to settle disputes over account management. Check for any bankruptcies, loan defaults or other indications of corporate or personal financial mismanagement.
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Tips & Warnings
Find out from the broker's personal references if they have dealt mainly with the broker or with an assistant. If the assistant has handled anything more than the normal administrative business for the broker, find another broker.
