Integrity Matters
March 29, 2006

Finding an honest broker takes work

Question: (E-233)

Dear Jim:

Bear Stearns recently bilked investors out of millions. They are paying $250 million dollars in fines and damages, disappointingly without admitting or denying charges. How can I find an investment adviser with integrity?


Until a culture of compliance becomes the norm for investment houses, thievery will continue, enabling money-schemers to con their clients while pocketing incredible profits.

When a 26-year-old trader complains that his annual bonus was less than a million dollars, then many hard-working investors will question the integrity of the financial advisory business. Is it about legitimate customer service or marginalizing decisions simply to claw bonus dollars from unsuspecting investors? Illegal market timing practices by unscrupulous brokers are an industry cancer.

Neither the federal government nor its incredibly complex laws will have a positive sustained impact until society demands and enforces integrity, from the top down and from the bottom up. In the meantime, the New York Stock Exchange and the Securities and Exchange Commission are challenging financial advisers and investment firms to clean up their acts.

Finding a competent and credible financial adviser in the interconnected world of investments demands serious due diligence. Securing accurate information regarding custodial integrity is hard work, requiring perseverance. Not only must the adviser's credentials be transparent, but there must also be full disclosure of how assets are going to be held in custody. Learn with whom your financial adviser might be placing your investments and ask for the same careful assessment to be applied.

In a nutshell, be sure you do the following:

  • Know what you want.
  • Find out what they provide.
  • Understand how they will deliver your results.
  • Require congruence between their goals and yours.
  • Monitor performance regularly, remaining alert to trends that are inconsistent with desired objectives.
  • Continue to pay only for results that you want.
Remember, it is your money!

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