Check Out Your Broker or Financial Advisor

A savvy investor takes the time to check out the background of the brokerage firm and individual financial professional (whether a stockbroker or investment adviser) BEFORE doing business with him or her. If you already have entrusted your money to a brokerage firm or financial professional WITHOUT doing a background check, it is important to take the time now to do so.

The major resources for broker/advisor background checks are:

STATE SECURITIES AGENCIES - CENTRAL REGISTRATION DEPOSITORY (CRD)

The Central Registration Depository is a database of licensing and other regulatory information that encompasses nearly all broker dealers, investment advisory firms, stockbrokers and individual investment advisers in the United States. Maintained jointly by the North American Securities Administrators Association (NASAA) and the National Association of Securities Dealers (NASD), CRD information may be accessed by contacting the state agency where you live.

Find the state securities regulator where you live.

What to look for when checking out your stockbroker or investment advisor.
State disclosure programs are governed by state law, and may
provide additional information on brokers licensed by the state.

NASD - BrokerCheck

NASD makes information on securities professionals and firms available online and, in most cases, detailed report information is returned to you by e-mail.

Go to the website of the NASD for more information on their resources.

ONLINE RATINGS AND RANKINGS

Below are links to some independent ratings and rankings of online brokerage firms. The Investing Online Resource Center makes no recommendations of its own and does not vouch for or otherwise endorse any of the ratings/rankings listed. You may find the online brokerage ratings/rankings to be a useful starting point, but they do not comprise an adequate basis for your decision about selecting an online broker.

Keep in mind that these ratings/rankings use a variety of tests, standards and other points of evaluation that may or may not be appropriate to your particular circumstances.

Brokerage Firm

Brokerage firms are licensed to buy and sell securities for clients and for their own accounts. Brokerage firms provide individual investors their link to the financial markets by employing brokers who carry out the investor’s order to buy or sell securities.

The firm may be a huge, corporation with hundreds of brokers, a small partnership with only one broker or any size in between. A brokerage firm could also be a full-service firm, a discount firm or somewhere in between. Typically, larger firms, and full-service firms, provide an increasing range of financial services, including financial planning, asset management, and educational programs. In addition, many maintain research departments for their own and their clients’ benefit. Other brokerage firms, such as online firms and discount firms, are increasingly providing their customers with a wealth of investment information on their websites and encouraging their customers to trade electronically.

An investor should note that while online and discount brokerage firms may charge lower commissions than full-service brokerage firms to execute their buy and sell orders, those firms are also less likely to provide the range of services mentioned above. This may not be an issue for many investors as extensive information and online account access are now readily available. The individual investors’ needs will dictate which services will be required.