Your Wealthy Mind

How to Verify if Your Broker is Trustworthy

*Contributed by Andrew Altman of Slickbucks.

No one wants to trust their long-term financial security to a shady broker whose offered security-selling services may not be on the level.

Fortunately, there is an easy rule of thumb to follow when seeking out a brokerage that can fulfill your future needs: avoid any potential broker that doesn’t give you direct answers to your questions, and stick only with brokers that have information that is covered by various informational outlets.

You shouldn’t ever need to spend a lot of effort trying to affirm the integrity of a broker’s character, as the ones that are trustworthy always make that process easy for their clients.

Nonetheless, you should not rely purely on word-of-mouth to zero in on a broker that you can trust will properly sell you the securities you’ll need. There is a fairly involved research process that you should go through, but we explain in the following guide the best procedure you should take while going about it.

How to Verify if Your Broker is Trustworthy

1. Refer to Various Company Review Websites

Brokerages, like other companies, can be reliably assessed by looking them up on websites that publish customer reviews for businesses.

Trustpilot is an example of one such site that can easily showcase the service quality and customer satisfaction rate of any registered business promoted on it. This accuracy results from how all of the reviews are written by customers; even though there will always be occasional customers that will write scathing reviews of businesses that receive universal praise otherwise, you can still gauge how highly the generalized majority of a business’ consumer base regards it.

Sites like Trustpilot aggregate customer reviews so that listed brokerages will be assigned averaged ratings based on every score that has ever been awarded to it by customers.

Because of this, you can be wary of licensed brokerages with lower average scores and a lot of reviews that complain about the same problems, and you can be reasonably assured that the highest-scoring brokerages that have very few negative comments will be strong choices for you.

 

2. Let the Government’s SEC Agency Inform You

Another way to verify a brokerage’s legitimacy is to look at the Central Registration Depository, a digital database managed by the United States Securities and Exchange Commission.

Because the law required all brokers listed in the SEC’s records to have registered with this agency, you can find verified, unbiased information on all of a broker’s background, including education and whether the broker was the subject of disciplinary actions.

The SEC’s database cannot be hacked or manipulated, which guarantees the accuracy of its information.

A separate website offers a similarly thorough database of information on individual investment advisors; this website, the Investment Adviser Public Disclosure, is the best information source for people in search of advisors.

 

3. Rely on Trustworthy Word of Mouth

Anybody you personally know, assuming they had previously contracted the services of a brokerage or an independent investment adviser, may be able to give you very reliable advice in your search for a good brokerage of your own.

Even if you do not plan on using the same firm as your peers, they can still draw on their past experience to direct you toward the best out of the choices available to you. In fact, because their reputation would hinge on giving sound advice, they would have a lot of interest in making sure that they avoid potentially referring you to a shady brokerage.

 

4. Have a Face-to-Face Talk

Once you have decided on a reliable-looking broker, the final and most important step to take is to engage in direct talks with him. These talks are your most significant opportunity to assess whether the broker can suit your needs, so ask for as much relevant information about his service as you can.

At the same time, pay attention to how readily the broker is able to answer each question you send his way; if it looks like he internally has doubts about his answers and that this is leading him to respond indirectly and with delays in his speech, this should alert you to the likelihood that he is not truly trustworthy.

Your questioning should let you find out how he will communicate with you and how he would get paid on his end for providing a service to you.

After you have affirmed that he can be trusted to be ethical in his procedure, tell him about the specifics of your actual needs and why you might need one specific category of security over another. This will let you assess whether you can trust him to be competent in actually meeting your goals, which is another highly important factor pertaining to whether he is the right broker for you.

 

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