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?
Response:
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!
